Canada’s Enhanced Corporate Social Responsibility Strategy Establishes New Consequences for the Extractive Industry

This new strategy builds on Canada’s first CSR strategy, launched in 2009. The main accomplishment of the 2009 strategy was to create the Office of the Extractive Sector Corporate Social Responsibility Counsellor, which was to “assist in resolving social and environmental issues relating to Canadian companies operating abroad in this field.” Responding to criticism that the 2009 strategy was largely without teeth, however, the Canadian government recently rolled out a new plan.

The Enhanced CSR Strategy endorses CSR standards, including those issued since 2009 and sets out positive and negative consequences for companies depending on whether they align, or fail to align, their conduct with those standards and whether they participate, or fail to participate, in Canada’s CSR dispute resolution processes, which aim to resolve CSR disputes before they escalate.

Canada’s Enhanced CSR Strategy expressly endorses several CSR standards, including standards that have been added or updated since the 2009 strategy, which extractive companies are expected to follow:

• OECD Guidelines for Multinational Enterprises, including the 2011 updates;
• United Nations Guiding Principles on Business and Human Rights;
• Voluntary Principles on Security and Human Rights;
• International Finance Corporation’s (IFC’s) Performance Standards on Social and Environmental Sustainability (which the Strategy notes form a basis for the Equator Principles, to which Export Development Canada is a signatory and a member of the Steering Committee);
• OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas; and
• Global Reporting Initiative.

Pursuant to the Enhanced CSR Strategy, the Counsellor’s office continues to have two main responsibilities: (1) to “offer advice and guidance to stakeholders on implementing CSR performance guidelines”; and (2) to “review the CSR practices of Canadian extractive sector companies operating outside Canada.” Within this second role, the CSR Counsellor’s Office has a non-judicial Review Process aimed at helping companies and project-affected stakeholders resolve disputes before they escalate by engaging the parties in dialogue and constructive problem-solving. This review process may be initiated by companies or project-affected individuals or communities.

When “the CSR Counsellor determines a situation would benefit from formal mediation, the Counsellor will encourage and help parties to refer issues” to Canada’s National Contact Point process for the OECD Guidelines for Multinational Enterprises (NCP). The NCP facilitates access to consensual and non-adversarial procedures, such as conciliation and mediation, to help companies and communities resolve issues related to the implementation of the OECD Guidelines.

To encourage compliance with CSR standards and participation in Canada’s CSR dispute resolution mechanisms, the Enhanced CSR Strategy provides both carrots and sticks. Companies that are found to comply with the Enhanced CSR Strategy will be recognized by the CSR Counsellor’s Office as eligible for enhanced Canadian economic diplomacy. Those that do not will face negative consequences, including:

• Public disclosure of a company’s decision not to participate in the review processes of the CSR Counsellor’s Office or the NCP;
• Withdrawal of advocacy support by the Canadian government, including by the Canadian Trade Commissioner Service (TCS), which provides local contacts, assists in resolving local problems, and assists with market preparation and assessment;
• Withdrawal of diplomatic support by the Canadian government (such as issuance of letters of support, advocacy efforts in foreign markets, and participation in Canadian government trade missions); and
• Restrictions on the availability of financing or other support from the Canadian government’s financing crown corporation, Export Development Canada (EDC), which relies upon the Equator Principles as a benchmark for assessing environmental and social risk in projects.

By way of comparison, the United States government also endorses and supports many of these same standards and others and has announced it is developing a new CSR policy. The United States promotes compliance through a variety of laws and initiatives as outlined in the State Department’s “U.S. Government Approach on Business and Human Rights.” Having acceded to the OECD Guidelines for Multinational Enterprises, the United States government also has a National Contact Point to assist in the resolution of complaints arising under the OECD Guidelines although, unlike Canada, it has no policy regarding the consequences of failing to use the NCP process.