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The state of Canada’s Corporate Social Responsibility strategy

Will the appointment of a new CSR Counsellor improve the mining sector’s record abroad?

By: /
25 March, 2015
By: Jeffrey Bone
Doctoral Candidate at the University of Connecticut, School of Law and a Lecturer at the University of Alberta, School of Business

Mining companies are unique in that they have always had to go where the resources they want are physically located. These areas are often remote, environmentally delicate, and inhabited by indigenous people who will not equally receive the economic benefits of development.

Canadian mining companies’ international assets have increased in the past 10 years to a value of $210-billion from $30-billion. In light of these investments, some argue that the environment and communities from where these minerals are extracted have been negatively impacted by the extractive sector and have called for more accountability for Canadian companies’ work abroad.

In early March, the Canadian government appointed a new federal Corporate Social Responsibility (CSR) Counsellor for the extractive sector after paying $180,000 to run the vacant office for more than a year. But it is unlikely the appointment of Jeffrey Davidson, an academic at Queen’s University, reflects a shift in the government’s approach to regulating the overseas activity of the extractive sector. This approach has been characterized by a preference for market-based incentives compared to prescriptive law reform concerning mining companies operating abroad.

The government favours non-binding mechanisms for resolving international mining disputes that do not involve Canadian law or courts. Unfortunately, Davidson’s appointment will not likely result in more accountability, essentially, because the powers to investigate and receive complaints has not changed.

In 2009, the government first unveiled its CSR strategy, which established the Office of the Extractive Sector CSR Counsellor. The CSR Counsellor’s role is to investigate disputes raised by foreign communities who allege wrongdoing by Canadian mining companies abroad. The office is not vested with any civil or criminal powers of enforcement. The CSR Counsellor cannot impose a remedy or issue any sanctions. From 2010 to 2013, almost all of the complaints filed with the CSR Counsellor ended with the corporate respondent refusing to participate in the process. Even those cases that proceeded failed to produce meaningful long-term results.

A telling example of the office’s shortcomings was on display in the first case considered. In 2011, the CSR Counsellor received a request to review the operations of the Platosa mine, owned and operated by Excellon Resources Inc. in Mexico. According to the complainants, the company reported a potential theft of copper by its employees to the state police who, allegedly on the company’s premises, beat several of the accused. Further, it was alleged that workers who attempted to unionize were threatened.

As part of the review, the CSR Counsellor was permitted to visit the site and held numerous meetings with the mine’s staff, local communities and company executives. After the CSR Counsellor received credible evidence to support the claims of the complainants, the company decided against proceeding with the dispute resolution process, citing the best interest of the shareholders and company as a whole. As such, the file was closed. The closing report contains a forceful indictment by the CSR Counsellor against Excellon Resources for failing to maintain a constructive dialogue with the CSR Counsellor and the complainants. In many ways, the case foreshadowed the fate of the CSR Counsellor’s complaint process, as it became the norm for respondent companies to withdraw from review, thereby preventing the CSR Counsellor from investigating any further. It is also one of only a few cases where the CSR Counsellor was permitted to visit a project site and meet with staff and company officials as part of their review.

That first CSR Counsellor, Marketa Evans, quietly left her position in 2013. Under her mandate none of the complainants received a remedy as a result of utilizing the CSR Counsellor. The lack of effective engagement was not the result of the CSR Counsellor’s willingness to achieve meaningful outcomes, but reflective of the frail authority given to the office.

Canada’s original CSR strategy was released in part as a reaction to the near-passage of a private member’s bill — Bill C-300 — that would have made Canadian mining corporations which operate in developing countries while benefiting from the financial support of the Canadian government subject to withdrawal of funding if its environmental and human rights performance abroad violated international standards. The World Bank and United States apply similar requirements.

In late 2014, the Government of Canada enhanced the CSR strategy by mimicking Bill C-300 with the introduction of ‘economic diplomacy’ to encourage multinational corporations to align with industry best practices. The government is now committed to withdrawing financial support to corporations that fail to participate in the CSR Counsellor’s dispute resolution process. In addition, the government re-focused the role of the CSR Counsellor to resolve disputes in the early stages and avoid the appearance of providing long-term mediation for the parties.

On a positive note for those seeking further accountability of corporate conduct abroad, the inclusion of economic diplomacy is a promising tool to enhance the human rights and environmental record of Canadian companies operating abroad and aligns with the original intent of the failed Bill C-300.

As a critique, the 2014 update to Canada’s CSR strategy in fact reduces the authority of the CSR Counsellor. Some commentators and groups such as the Canadian Catholic Organization for Development and Peace advocated for the role of the CSR Counsellor to be expanded into an ombudsman service with the power to order remedies and advocate on behalf of foreign communities impacted by Canadian mining operations. This did not happen. Instead the role of the CSR Counsellor in monitoring the overseas activities of Canadian mining companies has been diminished, not expanded. The fact that cooperation with the CSR Counsellor remains voluntary and not enforceable suggests that the CSR Counsellor has not been given an effective mechanism to regulate the foreign activities of the extractive sector.

The new CSR Counsellor, Jeffrey Davidson, has exceptional work experience across public and private sectors and has been involved with mining and mineral resource development for the past 35 years. But as competent as Davidson may be, the government has not given him the tools necessary to be an effective regulator of the extractive sector. The proper role of the CSR Counsellor therefore deserves further study by government and industry.

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