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Pursuing the Real Canadian Advantage

A Discussion Paper:

Building the Canadian Advantage

and

Bill C-300: An Act Respecting Corporate Accountability

for the Activities of Mining, Oil or Gas in Developing Countries

October 2010

The Evangelical Fellowship of Canada 1810-130 Albert Street Ottawa, ON K1P 5G4

Phone (613) 233-9868 Fax (613) 233-0301 Ottawa@efc-canada.com www.theEFC.ca

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Contents

Executive Summary .......................................................................................................................................3

1. Driving the Canadian international extractive industry into a post-crisis era ......................................5

1.1 Two Alternatives for the International Canadian Extractive Industry .....................................5

1.2 Methodology ...........................................................................................................................6

2. The Global Crisis, Business Ethics and Corporate Social Responsibility ............................................7

2.1 The Sullivan Principles ...........................................................................................................9

2.2 The Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises ................................................................................................................................ 10

2.3 The Caux Round Table ....................................................................................................... 11

2.4 The International Finance Corporation’s Policy on Social & Environmental Sustainability 11

3. Building the Canadian Advantage: Is a voluntary approach the preferred alternative? .................... 11

3.1 The International Finance Corporation (IFC) Policy ............................................................ 12

3.2 The Extractive Industries Transparency Initiative ............................................................... 13

3.3 The Centre of Excellence, the Counsellor and the National Contact Point ........................ 13

3.4 The Organisation for Economic Co-operation and Development Guidelines ..................... 13

3.5 Failure of the OECD Guidelines to deal with Human Rights issues ................................... 14

4. Bill C-300: Is the regulatory approach as identified in Bill C-300 productive in achieving corporate social responsibility? .................................................................................................................................. 15

4.1 Duplication ........................................................................................................................... 15

4.2 Have Canadian corporations been implicated in serious violations of human rights and environmental damage? ............................................................................................................ 16

4.3 What would be the financial impact on the international Canadian extractive industry? .... 17

4.4 Is a legal approach a punitive approach? ........................................................................... 18

4.5 Would Bill C-300 be enforceable? ....................................................................................... 18

4.6 Bill C-300 is a private member’s Bill without attached resources ....................................... 19

5. The Advantages of a Regulatory Approach ........................................................................................... 20

6. Conclusion ............................................................................................................................................... 20

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Executive Summary The purpose of this discussion paper is to consider two proposed alternatives that seek to secure the continuing corporate social responsibility of the international Canadian extractive industry operating in developing countries. Both proposals are the result of identified concerns with current standards of operation.

One proposal is the government-developed strategy known as Building the Canadian Advantage. The aim of this strategy is to promote the adoption of voluntary initiatives such as the Guidelines for Multinational Enterprises of the Organization for Economic Co-operation and Development (OECD) and the International Finance Corporation’s (IFC) Policy on Social & Environmental Sustainability.

Another proposal is found in Private Member’s Bill C-300, An Act Respecting Corporate Accountability for the Activities of Mining, Oil or Gas in Developing Countries, first introduced in February, 2009 by John McKay, MP. Passage of this bill would require adherence to environmental best practices and international human rights standards by Canadian mining, oil and gas corporations operating in developing countries. It would also assign responsibility to the Minister of Foreign Affairs and the Minister of International Trade for issuing guidelines that set corporate accountability standards for mining, oil or gas activities. Lastly, it would require annual reporting by the Ministers to both Houses of Parliament.

One argument against the bill is that the voluntary approach proposed by the Building the Canadian Advantage strategy is enough to ensure that the operations of the international Canadian extractive industry are consistent with international best practices in the areas of human rights, social responsibility, and environmental protection. Another argument is that passage of the bill and its coming into force would damage the reputation of the international Canadian extractive industry and put it at a disadvantage. It is also claimed that a legal, regulatory approach to the issue is counterproductive. Opposition to Bill C-300 comes mainly from the extractive industry itself.

This discussion paper’s conclusions suggest that the initiatives of Building the Canadian Advantage have promoted the adoption of an improved standard of corporate social responsibility. However, both the OECD Guidelines and the IFC Policy—themselves voluntary in nature—have not met expectations. Their ability to prevent the negative impacts of extractive industry operations in developing countries, including violations of human rights and environmental damage, have been diminished by their voluntary nature, as well as by a lack of proper monitoring and enforcement mechanisms. Encouragingly, the OECD has begun to update its guidelines in order to address the lack of enforcement and the improper coverage of human rights issues. As a result Building the Canadian Advantage in its current form will be outdated—if it is not already—because the state of one of its main pillars (that is, the OECD Guidelines) has been deemed to be outdated by the OECD. This makes it the ideal time to consider necessary changes to Canadian government policy.

The conclusions also note that claims against Bill C-300 are not supported. On the contrary, its passage would likely provide a competitive advantage to Canada and the international Canadian extractive industry. This is particularly evident given the growing interest in creating inter-jurisdictional legislation to deal with companies reluctant to put in place best practices on matters of human rights, environmental protection, and corporate social responsibility. Our analysis, suggests that Bill C-300 and Building the Canadian Advantage are compatible and complementary.

The United Nations and the OECD are two of the many international institutions that cite the lack of business ethics and a poor sense of corporate social responsibility as major causes of the recent economic crisis. There is a growing consensus on the need to take stronger measures to prevent and mitigate the impact of economic development on communities and on the environment. The OECD, the United Nations and other international organizations are therefore looking at improving regulations to address this issue. The United Kingdom, for example, has

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taken the lead by passing the Bribery Act, which shows their commitment to helping combat bribery and corruption both within their borders and overseas. The impact assessment of that Act shows that it will bring financial, reputational, and competitive benefits to companies from the United Kingdom that operate overseas. This kind of legislation will provide a competitive advantage to multinational corporations in a post-crisis era, when the need for stronger business ethics and better legislation in order to support corporate social responsibility and meet the Millennium Development Goals is being more clearly understood.

The OECD aims to complete the updating of the Guidelines for Multinational Enterprises in 2011. By integrating Bill C-300 with Building the Canadian Advantage, Canada can put itself at the forefront of this trend. Canada can demonstrate its commitment and readiness to begin implementing and enforcing the new Guidelines, especially with regard to human rights, through a strong mechanism that combines the voluntary nature of the Guidelines with a legal mechanism to be used in cases of non-compliance with standards of business ethics and corporate social responsibility on the part of members of the international Canadian extractive industry.

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1. Driving the Canadian international extractive industry into a

post-crisis era The Golden Rule:

So in everything, do to others what you would have them do to you. Mathew 7:12, NIV

In 2006, a report by John Ruggie, the United Nations Special Representative of the Secretary-General on Business and Human Rights, found that the extractive industry (i.e. mining, oil and gas) accounted for two-thirds of reported human rights abuses. Importantly, in approximately 60% of these abuses, corporations were involved through direct actions or omissions.

1 Despite the fact

that Canada is recognized as a world leader in its quality of governance, multinational Canadian extractive corporations have been implicated in violations of human rights, criminal activity, links to assassinations, and severe environmental damage in developing countries.

In the global context, trade and economic development are expected to contribute to reducing poverty and achieving sustainable development, which is why the North American Agreement on Environmental Cooperation was created in parallel to the North American Free Trade Agreement.

2 As part of this trend, the notion of the socially responsible corporation emerged

during the 1970s, in response to concerns about the lack of government action to address the social and environmental impact of economic development.

This also came in response to the lack of responsibility on the part of the companies whose operations were causing these consequences. The response of the international community was to release codes of conduct with ethical principles for conducting business while respecting human rights and minimizing the social and environmental impact of this business. The international Canadian extractive industry has not been guiltless in this regard, as some corporations have been and continue to be implicated in violations of human rights and other types of social and environmental destruction.

1.1 Two Alternatives for the International Canadian Extractive Industry

As the home base of many multinational extractive corporations, Canada has a responsibility to take action to prevent negative impact, both at home and abroad, from its industries. Currently, debate is taking place about whether the best way to do so is to adopt a purely voluntary approach or a regulatory one. This discussion paper seeks to present the main arguments supporting or opposing each of the two contrasting proposals.

In February 2009, John McKay, MP introduced the first proposal in the form of Bill C-300, An act respecting corporate accountability for the activities of mining, oil or gas in developing countries.

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The Bill aims to ensure consistency with environmental best practices and international human rights standards by Canadian mining, oil and gas corporations operating in developing countries. It would also assign clear responsibilities to the Minister of Foreign Affairs and the Minister of International Trade for issuing guidelines that set corporate accountability standards for mining, oil or gas activities.

Supporters of Bill C-300 claim that a voluntary standard for the international Canadian extractive industry has proven unsuccessful and, formalizing that voluntarism as in the second proposal, will not make it any more successful.

1 Jernej Letnar Černič. “Corporate Responsibility for Human Rights: a critical analysis of the Organisation for

Economic Co-operation and Development Guidelines for Multinational enterprises,” Hanse Law Review 4:1 (2008), 75. 2 Commission for Environmental Cooperation, North American Agreement on Environmental Cooperation,

1993, preamble. 3 Canada, Bill C-300, An act respecting corporate accountability for the activities of mining, oil or gas in

developing countries, 2d. sess, 40th

Parliament, 2009.

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In March 2009, the Canadian government introduced the second proposal, “Building the Canadian Advantage: a corporate social strategy for the Canadian international extractive sector.”

4 This policy encourages the adoption of international guidelines such as the OECD

Guidelines for Multinational Enterprises5 and the IFC’s Policy on Social and Environmental

Sustainability.6 Representatives from the international Canadian extractive industry and

supporters that prefer a voluntary approach support Building the Canadian Advantage and have therefore presented opposition to the mandating of similar principles as contained in Bill C-300.

Opponents of Bill C-300 argue that the regulatory approach it proposes will neither help improve corporate social responsibility in the international Canadian extractive industry or protect human rights and the environment in developing countries. They hold that the right solution is the voluntary approach as put forward in Building the Canadian Advantage.

The intent of this discussion paper is to consider the following three questions:

• What are the globally recognized principles of business ethics and corporate social responsibility?

• Is the voluntary approach of Building the Canadian Advantage the preferred alternative to prevent future social and environmental impacts as have been in the past associated with the international Canadian extractive industry?

• Is the regulatory approach as identified in Bill C-300 productive in achieving corporate social responsibility, and would it potentially be damaging to the international Canadian extractive industry?

1.2 Methodology

The intent of both proposals is to promote greater accountability and corporate social responsibility in the international Canadian extractive industry. Since corporate and social responsibility is deeply rooted in business ethics, the approach in answering these three questions was to find out what the world’s leading organizations are stating about corporate social responsibility and how each alternative fits within the broader context. This was achieved by searching for and reviewing the following:

Policy documents, reports, and guidelines that major international economic institutions have endorsed to guide the operations of multinational corporations. This includes the abovementioned OECD Guidelines and the IFC Policy. Web sites consulted include that of the OECD,

7 the United

Nations Global Compact,8 the United Nations Principles for Responsible Investment,

9 the World

Business Council for Sustainable Development10

and the Caux Round Table.11

Reports, articles, and other materials that address the crisis that affected the global economy from 2007 to 2009 and how to overcome its economic, social, and environmental impacts. This search was conducted using the Global Reference on the Environment, Energy and Natural Resources,

12 the Catalogue of the Library of the University of Calgary

13 and Google.

14 Search

4 Canada Department of Foreign Affairs and International Trade, “Building the Canadian Advantage: A

Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector,” March 2009. Available: http://www.international.gc.ca/trade-agreements-accords-commerciaux/ds/csr-strategy-rse-stategie.aspx. Accessed: October 7, 2010. 5 Organisation for Economic Co-operation and Development “Guidelines for Multinational Enterprises,” 2008.

6 International Finance Corporation, World Bank Group, “Policy on Social & Environmental Sustainability,”

April 30, 2006. 7 www.oecd.org.

8 www.unglobalcompact.org.

9 www.unpri.org/principles.

10 www.wbcsd.org.

11 www.cauxroundtable.org.

12 www.calgarypubliclibrary.com/Elibrary.aspx?p=155. (Requires library login).

13 library.ucalgary.ca.

14 www.google.ca.

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words included “mining, oil & gas,” “multinational corporations,” “green economy,” “corporate social responsibility” and “business ethics.”

2. The Global Crisis, Business Ethics and Corporate Social

Responsibility What is the relationship between corporate social responsibility and business ethics? Phil Clements,

15 former global board member of PricewaterhouseCoopers, and leadership expert

John C. Maxwell16

agree that the foundations of business ethics are laid on a single, timeless principle called the Golden Rule:

So in everything, do to others what you would have them do to you (Mathew 7:12, NIV).

Clements affirms that today’s business world is inherently founded on “the Judeo-Christian traditions of individual property rights, individual responsibility, and free exchange, all within a culture of respect for authority and one’s fellow-man.”

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He also states that modern corporate governance requires corporations to set the standards that everyone in the corporation should abide by. Boards and managers are responsible for ensuring that everyone knows that rules are to be followed, that laws are not to be broken, and that values are the foundations that transcend these rules. He considers training to be another timeless principle for corporate ethical culture:

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These commandments that I give you today are to be upon your hearts. Impress them on your children. Talk about them when you sit at home and when you walk along the road, when you lie down and when you get up. Tie them as symbols on your hands and bind them on your foreheads. Write them on the doorframes of your houses and on your gates (Deuteronomy 6:6-9, NIV).

The concept is that a consideration of ethics must start from a consideration of the foundational values of the organization by its leadership and then spread through all the levels of an organization. The values, through rules and laws, are passed on from the board and senior executives to employees in all levels of the hierarchy. In this way, ethical behaviour guides human activity. In the business world, business ethics are the foundation of corporate social responsibility. It is not possible to be a socially responsible corporation in the absence of business ethics.

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Ruggie, in addressing corporate responsibility in supply chains, began his discussion paper on that topic by stating that:

The corporate responsibility to respect human rights means to avoid infringing on the rights of others and addressing adverse effects that may occur. This responsibility applies across an enterprise’s activities and through its relationships with other parties, such as business partners, entities in its value

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Phil Clements, “Business ethics today: a review of timeless principles that apply to the financial industry” Corporate Finance Review 15:1 (July/August 2010), 24 16

John C. Maxwell, There's No Such Thing As "Business" Ethics: There's Only One Rule For Making Decisions (Warner Brooks, United States: 2003). Discussed in Phil Clements, “Business ethics today: a review of timeless principles that apply to the financial industry” Corporate Finance Review 15:1 (July/August 2010), 24. 17

Clements, 24. 18

Ibid., 25. 19

Mark S. Blodgett, “International ethics standards for business: NAFTA, CAUX principles and corporate codes of ethics” Review of Business, March 22. Available: www.allbusiness.com/human-resources/employee-development-employee-ethics/653997-1.html. Accessed: October 7, 2010.

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chain, other non-state actors and state agents.... 20

This is independent of the State duty to protect against corporate-related human rights abuse by taking appropriate steps to prevent, investigate, punish and redress such abuse.

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Business ethics are most properly based in universal principles. As Clements and Maxwell state, the Golden Rule is universal and exists in almost every culture and religion. Thus, the Golden Rule can be considered the main principle of corporate and social responsibility. Business organizations should use it as the foundation of their corporate social responsibility policies in every country where they operate, independently of the prevailing religion or culture. Failing to follow this principle may have potentially devastating consequences for the organization and its stakeholders, consequences that may go far beyond the geographic area where the operations take place.

Of course, reflected in the Golden Rule are concepts of caring for those who are vulnerable and respecting the human dignity of each individual – in short, loving one’s neighbour as one loves oneself. The OECD, Clements, and the Caux Round Table (an international network of business leaders) have all invested effort into tracing the roots of the recent economic crisis, which they have found to be in unethical business practices and the failure of the current economic system. Angel Gurría, Secretary-General of the OECD, argues that the financial crisis

Was created by … a toxic combination of unethical behavior [sic.] by companies and a faulty regulation and supervision of their activities. The crisis also exposed the deficiencies of international institutions.

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Similarly, Clements states that

...today much of our human resources discussions have discarded these timeless principles, calling them naive or uncompetitive. Instead, we design performance-based compensation plans that cause people to pursue their self-interest. ... Much of the financial crisis has been driven by such short-term market making.

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Lastly, the Caux Round Table holds that:

Events like the 2009 global financial crisis have highlighted the necessity of sound ethical practices across the business world. Such failures of governance and ethics cannot be tolerated as they seriously tarnish the positive contributions of responsible business to higher standards of living and the empowerment of individuals around the world.

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The self-interested pursuit of profit, with no concern for other stakeholders, will ultimately lead to business failure and, at times, to counterproductive regulation.

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20

John Ruggie, “The corporate responsibility to respect human rights in supply chains,” discussion paper for

the 10th Organisation for Economic Co-operation and Development Roundtable on Corporate

Responsibility, June 30, 2010 (hereafter “Ruggie a”), para. 1.

21 Ibid., fn 1.

22 Angel Gurría, “Business ethics and Organisation for Economic Co-operation and Development principles:

What can be done to avoid another crisis?” Remarks delivered at the European Business Ethics Forum (EBEF), Paris, France, 22 January 2009. Available: www.oecd.org/document/3/0,3343,en_2649_201185_42033219_1_1_1_1,00.html. Accessed: October 7, 2010. 23

Clements, 24. 24

Caux Round Table, “Principles for business,” 2010. Available: www.cauxroundtable.org/index.cfm?menuid=8. Accessed: October 7, 2010. 25

Ibid.

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The World Business Council for Sustainable Development,26

The United Nations Global Compact

27 and the OECD share this opinion on the need to integrate Business Ethics and

Corporate Social Responsibility as a foundation for sustainable development. According to Gurría

28 and the Caux Round Table,

29 business ethics should be the foundation of world-wide

economic development to ensure that the crisis does not happen again, and that development should contribute to achieving sustainability. According to the World Business Council for Sustainable Development,

Corporate social responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.

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Ruggie considers business ethics to be an indicator of the strength and health of the economy, stating that the five key values of transparency, objectivity, reliability, honesty and prudence should be used to create new business ethical standards.

31 These five values are crucial for

economic development as well as for avoiding future crises, requiring financial institutions and businesses to share not only the benefits of economic development but also the responsibilities that come with such benefits.

The Caux Round Table relies on ethical business practices to provide the basis for the trust, responsibility, and confidence that make businesses successful and sustain free markets. In the absence of these, corporations do not respond to the needs of society and risk their own survival.

32 It is not enough to release a corporate social responsibility policy: managers and all

people within an organization and across its supply chain must commit to be proactive and behave ethically and socially responsible.

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With the current “lay of the land” of corporate social responsibility established, we turn to a brief examination of the historical development of corporate social responsibility principles and documents.

2.1 The Sullivan Principles

The first set of principles for corporate social responsibility was developed by Reverend Leon Sullivan in 1977, to guide American companies in conducting their operations during the apartheid-era in South Africa. The Sullivan principles encouraged companies from every country to consistently operate with respect for human rights, treatment of their employees by the standards required of them in their U.S. operations, and working in partnership for the improvement of the quality of life in communities in which they were operating. The Sullivan Principles were re-launched in 1999, and endorsed by the United Nations.

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26

World Business Council for Sustainable Development, “Business Role: Corporate Social Responsibility (CSR),” Available: www.wbcsd.org/templates/TemplateWBCSD5/layout.asp?type=p&MenuId=MTE0OQ. Accessed: October 7, 2010. 27

See www.unglobalcompact.org for more information. 28

Gurría. 29

Caux Round Table, “Principles for Business.” 30

World Business Council for Sustainable Development. 31

John Ruggie, “Updating the Guidelines for Multinational Enterprises,” discussion paper for the 10th Organisation for Economic Co-operation and Development Roundtable on Corporate Responsibility, June 30, 2010 (hereafter “Ruggie b”), para. 20. 32

Caux Round Table, “Principles for Business.” 33

Carla S. Lallatin, ‘’Business Ethics = Social Responsibility???” address to the 89th Annual International Supply Management Conference, April, 2004. 34

Mallerbanker.net, “The Global Sullivan Principles of Corporate Social Responsibility,” October 5, 2010. Available: www.mallenbaker.net/csr/CSRfiles/Sullivan.html. Accessed: October 7, 2010.

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2.2 The Organisation for Economic Co-operation and Development Guidelines

for Multinational Enterprises

One year before the Sullivan Principles were first developed, the Council of the OECD adopted their own Declaration on International Investment and Multinational Enterprises, which included a section entitled “Guidelines for Multinational Enterprises.” The Guidelines initially generated debate, but interest eventually vanished.

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In 1999, the OECD re-evaluated the Guidelines in the context of globalization and other changes that had taken place over the previous two decades. Two characteristics that were discussed were their voluntary nature and the fact that they were limited to OECD countries.

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The new Guidelines for Multinational Enterprises37

were adopted by the member countries of the OECD in 2000, however by 2010 the OECD and the United Nations acknowledged that the Guidelines are in need of being updated. The two pressing concerns with the current Guidelines are (i) their lack of enforceability due to their voluntary nature and (ii) the lack of proper guidance in addressing human rights issues associated with the operations of multinational corporations.

38,39

An important means of promoting the OECD Guidelines in each of the endorsing countries is through agencies called National Contact Points, which also help resolve corporate social responsibility issues related to the overseas activities of companies. Every year, the National Contact Points meet to report the activities undertaken to promote and implement the Guidelines,

40 with issues generally addressed by the National Contact Point of the country where

the issue arose.41

It is a government office, with various responsibilities:

• Encouraging observance of the Guidelines in a national context,

• Ensuring that the Guidelines are well known and understood by the national business community and other interested parties,

• Gathering information on national experiences with the Guidelines,

• Handling enquiries related to the Guidelines,

• Discussing matters related to the Guidelines,

• Assisting in solving problems that may arise with failure to comply with the Guidelines, and

35

Arghyrios A. Fatouros, “The Organisation for Economic Co-operation and Development Guidelines in a Globalising World” Organisation for Economic Co-operation and Development Directorate for Financial, Fiscal and Enterprise Affairs, Committee on International Investment and Multinational Enterprises, Feb. 17, 1999, paras. 2-8. 36

Ibid., paras. 10-12. 37

Organisation for Economic Co-operation and Development Directorate for Financial and Enterprise Affairs, “Organisation for Economic Co-operation and Development Declaration and Decisions on International Investment and Multinational Enterprises.” Available: www.oecd.org/daf/investment/declaration. Accessed: October 7, 2010. 38

See Ruggie a.

39Organisation for Economic Co-operation and Development Directorate for Financial and Enterprise Affairs,

“2010 Update of the Organisation for Economic Co-operation and Development Guidelines for Multinational

Enterprises.” Available: www.oecd.org/document/33/0,3343,en_2649_34889_44086753_1_1_1_1,00.html.

Accessed: October 7, 2010.

40 Organisation for Economic Co-operation and Development, “Annual Meeting of the National Contact

Points: Report by the Chair,” June 16-17, 2009. 41

Organisation for Economic Co-operation and Development Directorate for Financial and Enterprise Affairs, “National Contact Points for the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.” Available: www.oecd.org/document/60/0,3343,en_2649_34889_1933116_1_1_1_1,00.html. Accessed: October 7, 2010.

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• Helping resolve issues concerning the implementation of the Guidelines in relation to specific instances of business conduct.

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2.3 The Caux Round Table

Another group examining the issue of corporate social responsibility is the Caux Round Table. Founded in 1986, it has focused on the relevance of global corporate responsibility for achieving world peace and stability. The Caux Round Table Principles for Business were initially introduced in 1994 as the result of numerous consultations during the 1980s and 1990s among business executives from Japan, Europe, and the United States. The Caux Round Table Principles, introduced globally at the United Nations World Summit on Social Development in 1995, comprise ethical norms for doing business internationally and in diverse cultures.

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2.4 The International Finance Corporation’s Policy on Social & Environmental

Sustainability

The fourth set of principles comes from the IFC, which is part of the World Bank Group. It finances private projects in developing countries and gives advice to governments and businesses. In 2006, the IFC adopted its Environmental and Social Safeguard Policies

44 after

having adopted its Disclosure Policy in 1998.45

Based on the IFC standards, the Equator Principles were adopted in 2003 by ten of the top international banks.

46 The IFC began to apply its Policy and Performance Standards on Social

and Environmental Sustainability to all projects it finances.47

To oversee the application of its standards, the IFC monitors the implementation of an agreed action plan for the approved projects, visits the project sites, and requests annual reports on the status of meeting the social and environmental terms of the investment agreement. Communities affected by projects financed by the IFC can directly contact its’ Compliance Advisor/Ombudsman, which impartially responds to their concerns.

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3. Building the Canadian Advantage: Is a voluntary approach the

preferred alternative? It is within this global context for corporate social responsibility that we must consider the two proposals for governing the international Canadian extractive industry. The first proposal to be examined here is the government’s Building the Canadian Advantage strategy.

The Canadian government presented Building the Canadian Advantage to the OECD in 2009 during their Annual Meeting of the National Contact Points as a means of implementing the OECD Guidelines. The strategy is itself the result of consultations held during 2006 and 2007 with representatives of the extractive industry and stakeholders.

49 Key elements include:

42

Ibid. 43

Caux Round Table, “History of the Caux Round Table.” Available: www.cauxroundtable.org/index.cfm?&menuid=28&parentid=2. Accessed: October 7, 2010. 44

International Finance Corporation, “Policy on Social & Environmental Sustainability.” 45

International Finance Corporation, “Environmental and Social Standards.” Available: http://www.ifc.org/ifcext/sustainability.nsf/Content/EnvSocStandards. Accessed: October 8, 2010. 46

International Finance Corporation, “International Finance Corporation Celebrates One Year of New Performance Standards.” Available: http://www.ifc.org/ifcext/media.nsf/Content/IFC_Celebrates_Performance_Standards. Accessed: October 8, 2010.

47 International Finance Corporation, “Environmental and Social Standards.”

48 International Finance Corporation, “Understanding International Finance Corporation’s Environmental and

Social Review Process.”

49 Organisation for Economic Co-operation and Development, “Annual Meeting of the National Contact

Points: Report by the Chair,” 5 (“Box 1”).

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• Encouraging the industry to adopt voluntary initiatives for corporate social responsibility, especially the OECD Guidelines and the International Finance Corporation Policy,

• Establishing a Centre of Excellence to provide information about voluntary approaches to encourage the Canadian extractive sector companies to adopt these initiatives,

• Establishing the Office of the Extractive Sector Counsellor (“Counsellor”), which will work with the Canadian National Contact Point to help solve issues between stakeholders an corporations about corporate social responsibility overseas, and

• Clarifying that the Counsellor and the National Contact Point will operate separately. Canada’s National Contact Point for the OECD Guidelines is the entity responsible for promoting the guidelines and processing the instances about corporate social responsibility irregularities.

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It could be argued that the reliance of Building the Canadian Advantage on the IFC Policy, the Extractive Industries Transparency Initiative, the Centre of Excellence, the Counsellor and the National Contact Point, and the OECD Guidelines may in fact constitute weaknesses of the strategy as all of these alternatives are outside the control of the Canadian government and have been shown to have their own deficiencies, which therefore begs the question of whether Building the Canadian Advantage is, in and of itself, the preferred alternative for establishing a standard of social responsibility for the international Canadian extractive industry.

3.1 The International Finance Corporation (IFC) Policy

The IFC is responsible for monitoring both the implementation of the IFC Policy and the corresponding outcomes of the projects it finances. As Building the Canadian Advantage states, 80% of global projects receive funding from banks that have endorsed the Equator Principles.

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However, Building the Canadian Advantage fails to respond to three concerns about the effectiveness of the IFC Policy in increasing the social and environmental responsibility of the international Canadian extractive industry:

• The remaining 20% of projects receive funding from institutions that do not follow the Equator Principles, and therefore do not have to consider the IFC Policy.

• The adoption of the Equator principles does not imply that projects will be monitored in the same way as the IFC. Building the Canadian Advantage does not mention anything about the prior effectiveness of these principles. It is likely that there will be similar issues to those found for the OECD Guidelines (discussed below).

• There is no information to suggest that Canada is applying the IFC Policy, nor monitoring the expected outcomes, when it provides financial support to the international extractive industry.

The intervention of the Compliance Advisor/Ombudsman of the World Bank in the case of Canadian corporation Glamis Gold’s Marlin mine in Guatemala brought to light irregularities in the implementation and monitoring of the IFC. These irregularities included:

• Inadequate public consultation,

• The lack of proper coverage of human rights matters in the IFC Policy,

• The lack of enforcement of the IFC policies regarding detailed assessments of the likely social and environmental impacts,

• The lack of explicit criteria for evaluating critical project documents as social and environmental impact assessments and management plans, and

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Ibid. 51

Department of Foreign Affairs and International Trade, “Building the Canadian Advantage: A Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector.”

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• The lack of mechanisms to incorporate recommendations made by external auditors and third-party evaluators.

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Financial reporting under the IFC policy has also not met expectations, especially on human rights issues. The reports of the Compliance Advisor/Ombudsman show that despite the existence of the IFC Policy and its reporting requirements, communities continue to suffer socio-economic and environmental impacts caused by projects funded by the IFC.

53,

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3.2 The Extractive Industries Transparency Initiative

Another instrument that Building the Canadian Advantage considers for increasing corporate social responsibility is the Extractive Industries Transparency Initiative, which as the text of Building the Canadian Advantage notes, aims to increase a country’s transparency in the use of revenue from extractive industries.

55 As the results of the Governance Matters study show, most

developing countries where environmental damage and human rights issues may arise have a poor quality of governance.

56 Given these findings, it is questionable to what degree such

countries are going to adopt and properly implement the initiative. Therefore, the Extractive Industries Transparency Initiative may not address the responsibility of the extractive industry.

3.3 The Centre of Excellence, the Counsellor and the National Contact Point

Another concern with Building the Canadian Advantage is that the descriptions of the roles that the Centre of Excellence and the Counsellor will have in implementing the Organisation for Economic Co-operation and Development Guidelines duplicate and overlap with the established functions of the National Contact Point. Some of the questions raised for Building the Canadian Advantage on this issue are:

• How will such duplication and overlap be addressed?

• What factors are influencing the effectiveness of the National Contact Point?

• What strategic or cost/benefit analysis supports creating the Centre of Excellence and the Counsellor?

Without answers to these questions, the Building the Canadian Advantage strategy fails to justify the need for creating two new entities that duplicate the functions of the National Contact Point rather than strengthening the existing National Contact Point. Federal and provincial governments seem to be interested in reducing redundancy and duplication in environmental legislation,

57 and

the creation of such duplication in dealing with the environmental and social problems of the international extractive sector appears inconsistent with the goal of increasing efficiency and effectiveness.

3.4 The Organisation for Economic Co-operation and Development Guidelines

The predecessor of the OECD Guidelines for Multinational Enterprises was the Declaration on International Investment and Multinational Enterprises, adopted on June 21, 1976, by the OECD Council,

58 and new Guidelines were launched in 2000. It was another nine years before Building

the Canadian Advantage was released. This is relevant because if the OECD determined in 2010

52

MiningWatch Canada, “Backgrounder: Internal review slams World Bank over lapses at Guatemala Mine,” August 22, 2005. Available: www.miningwatch.ca/en/internal-review-slams-world-bank-over-lapses-guatemala-mine-backgrounder. Accessed: October 7, 2010. 53

International Finance Corporation Compliance Advisor Ombudsman (CAO), “The Office of the Compliance Advisor/Ombudsman: 2007–2008 Annual Report,” 2008. 54

CAO, “The Office of the Compliance Advisor/Ombudsman: 2005-06 Annual Report,” 2006. 55

DFAIT, “Building the Canadian Advantage: A Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector.” 56

Kaufmann, et al. 57

For example, see British Columbia Lieutenant Governor Steven L. Point, “Speech from the Throne,” February 9, 2010, 8. 58

Fatouros, para. 1.

14

that their Guidelines are outdated, and Building the Canadian Advantage relies on these Guidelines, then it is quite likely that Building the Canadian Advantage is outdated by association.

In 2010, after acknowledging that the Guidelines had significant weaknesses, the OECD began the process of updating them.

59 As stated above, the diffusion, implementation and enforcement

of the OECD Guidelines are the responsibility of the National Contact Points in member countries, and the OECD also encourages the use of the Guidelines in non-member countries.

60

However, there is no guidance as to how the Guidelines would be implemented in these non-member countries, which host the operations of multinational companies, but lack a National Contact Point.

The Guidelines provide good guidance for corporations seeking to increase their corporate social responsibility policies, but their effectiveness has not met expectations precisely because they are voluntary, that is, non-enforceable. Further, there is no mechanism to deal with enterprises that a) are not social responsibility-minded, or b) adopt corporate social responsibility policies only to appear to be socially responsible. The website of the OECD

61 includes the reports of the

Annual meetings of National Contact Points, but the reports do not present information on the effectiveness of the National Contact Points.

This inconsistent enforcement has the potential to affect communities in developing countries in two ways: a) they may suffer violations of human rights and environmental degradation by multinational companies, and b) they may also suffer the lack of justice and protection of their rights by the inaction or lack of capability of their national governments.

62

3.5 Failure of the OECD Guidelines to deal with Human Rights issues

The update of the OECD Guidelines was announced by Ruggie in 2010, who conducted a study on the effectiveness of the Guidelines in resolving human rights issues. He presented his findings to the Human Rights Council of the United Nations General Assembly, concluding that the Guidelines are missing elements necessary to fulfilling the goals set out by the Council in June 2008 under the “Protect, Respect and Remedy Framework.”

63 In presenting his findings, he first

offers an illuminating commentary on the Guidelines, stating that:

The Guidelines recognize that socially and environmentally sustainable markets and enterprises require principles and standards for responsible business conduct. While the Guidelines are recommendations addressed by governments to multinational enterprises, they should also affirm the need for states to fulfill their international obligations.

64

The first pillar of the United Nations “Protect, Respect and Remedy” Framework addresses the state duty to protect against business-related human rights abuse through appropriate policies, regulation and adjudication. Chapter I of the updated Guidelines (Concepts and Principles) similarly should stress that states must perform their required roles, individually and collectively, to ensure that the aims of the Guidelines are met.

65

Current language in the Guidelines reflects neither the needs of, nor best practices by, multinational enterprises when facing challenging human rights situations. Moreover, since the last Guidelines revision considerable progress has been achieved in clarifying the business and human rights agenda, as reflected in the United Nations “Protect, Respect and Remedy” Framework and the strong support it enjoys from governments, business associations and enterprises, trade unions and major NGOs. This combination

59

Organisation for Economic Co-operation and Development, “2010 Update of the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.” 60

Ibid. 61

See www.oecd.org. 62

Ruggie b, paras. 5-24. 63

Ibid.

64 Ibid., para. 3.

65 Ibid., para. 4.

15

of factors warrants a separate human rights chapter in the updated Guidelines, replacing current Guideline 2 under General Policies.

66

He then offers recommendations regarding this new chapter as well as other means of ensuring human rights are upheld. He states that:

The corporate responsibility to respect human rights means to avoid infringing on the rights of others and addressing adverse impacts that may occur. This responsibility exists independently of states’ human rights duties. It applies to all business enterprises in all situations. The new Guidelines chapter should affirm and reinforce this principle.

67

National Contact Points have the potential to serve as effective grievance mechanisms beyond the operational level. In order to realize this potential, the update should consider incorporating into the guidance for National Contact Points the principles for effectiveness and credibility [of] legitimacy, accessibility, predictability, equitability, rights-compatibility and transparency.

68

There are [at present] few if any official consequences of a National Contact Point finding against an enterprise. For example, in most cases the enterprise could apply immediately for export or investment assistance from the same government. To protect the integrity of the National Contact Point system, the update should consider ways to give weight to National Contact Point findings. The response need not necessarily be punitive. The home government could also work with the enterprise to improve its policies and practices. But where an enterprise fails to cooperate, the default presumption should be that a negative finding will be made public, and that it could affect the enterprise’s access to certain forms of public support and services for a specified period of time.

69

Currently, National Contact Points consider roughly 40 percent of the complaints submitted to them to be without substantive merit or falling beyond the Guidelines’ purview. A major reason for the latter is the absence of an “investment nexus”—either because the multinational involved is a buyer from, not an equity holder in, the supplier; or it is a lending institution that enabled an operating enterprise’s foreign investment, but is not itself the investor. Many participants in the update process consider it important to retain the link between the Guidelines and the Declaration on International Investment and Multinational Enterprises…. [As well,] the updated Guidelines [should] reflect widely used if not prevalent business models that barely existed when the Guidelines were last revised….

70

Lastly, his report provides further recommendations on areas such as due diligence, protecting human rights along the supply chain, managing legal ambiguities and dilemmas, and disclosure.

4. Bill C-300: Is the regulatory approach as identified in Bill C-300

productive in achieving corporate social responsibility?

4.1 Duplication

It has been argued that Bill C-300 will duplicate through legal means many aspects of corporate social responsibility already in place voluntarily.

71,72

66

Ibid., para. 5. 67

Ibid., para. 6. 68

Ibid., para. 26. 69

Ibid., para. 35. 70

Ibid., paras. 30-32. 71

Michael Bourassa, “Bill C-300 threatens Canada's international extractive sector” CIM Magazine, August, 2009, 53.

16

Creating legislation to ensure that the international Canadian extractive industry follows best practices of corporate social responsibility is not duplication.

On the contrary, Bill C-300 will fill a void in Canadian legislation and in the enforcement of the OECD Guidelines. In addition, in showing its commitment to fighting corruption and promoting corporate social responsibility within and beyond its borders through clear and effective legislation, passage and enforcement of the bill will make Canada a global leader in this effort.

4.2 Have Canadian corporations been implicated in serious violations of human

rights and environmental damage?

In an article published in 2010, Harvey Enchin expressed his opposition to Bill C-300 and denied that Canadian companies had been involved in violations of human rights. With regard to the relationship between the film Avatar and the real-life extractive industry, he states that:

A coalition of non-governmental organizations claims Canadian mining companies operate abroad in similar fashion [to the mining company in Avatar], commit murder and rape, foment civil war, blackmail government officials and destroy communities and the natural environment in their exploitation of mineral resources. Avatar is a work of fiction. And so are many of the preposterous allegations by the NGOs [against Canadian mining companies]….

73

In his analysis of the OECD Guidelines, Jernej Letnar Černič makes four points in regard to transnational corporations that contradict Enchin’s argument and bear out in regard to reports concerning some Canadian or subsidiary operations:

• Violations leveled against corporations include allegations of crimes against humanity, torture, racial discrimination, genocide, forced and child labor, slavery, environmental degradation and a broad array of human rights violations in relation to local communities, especially indigenous people. The extractive sector: oil, gas, and mining (cobalt, diamonds), account for most allegations of the human rights violations, by or involving corporations.

74

• The expansion of global markets has not been matched with sufficient protection for the people and communities who are victims of corporate human rights abuses.

• Victims of corporate human rights abuses have limited access to justice either in their home country or in the country where the company in question is registered…. there is a lack of robust reporting or monitoring criteria to demonstrate compliance. This is combined with a lack of analysis of the patterns of corporate abuse and their impact on individuals and their communities.

• Common weaknesses in voluntary initiatives include their limited coverage in terms of companies and rights, lack of robust reporting or monitoring criteria to demonstrate compliance, and failure to address the problem of companies who persist in their unwillingness to respect human rights.

75

The following examples suggest that Canadian companies, either directly or through their subsidiaries in developing countries, have been implicated in operating in violation of the voluntary guidelines.

• Goldcorp/Montana Exploradora was implicated in the shooting of a Guatemalan community leader resisting the effect of operations in the Marlin mine. Since 2005, Guatemalan community representatives have exposed violations of human and civil

72

Fasken Martineau DuMoulin LLP, “Sharp criticism for Bill C-300: Lawyers tell parliamentary committee Private Member's Bill threatens Canada's minerals industry,” November 26, 2009. Available: www.fasken.com/firm-opposes-bill-c-300-in-ottawa. Accessed: October 7, 2010. 73

Harvey Enchin, “Will mining suffer if Bill C-300 becomes law? YES: It's biased and overly punitive,” Vancouver Sun, May 27, 2010. 74

Černič, 76. 75

Ibid., 95.

17

rights, negative health impacts and water pollution caused by mining operations. The Inter-American Commission on Human Rights of the Organization of American States asked the Guatemalan government to suspend the operation of Marlin mine.

76

• Pacific Rim subsidiaries (based in Vancouver) claimed prospects in three locations on El Salvador: El Dorado (San Isidro), Santa Rita (Trinidad, northwest of El Dorado), and Zamora (Cerro Colorado, to the west of Santa Rita)

77. Exploration activity at El Dorado

project led to open pit mining some of the deposits, contrary to the ban on open pit mining that the country of El Salvador decreed in its national territory. In 2008 the project should have been suspended because it had not received approval and the environmental permit from the Ministry of Environment and Natural Resources. However, the mine continued its operations. In April 2009, Pacific Rim used its American subsidiary to file an arbitration action under the Central America Free Trade Agreement (the United States – Dominican Republic - Central American Free Trade Agreement) against the government of El Salvador. This was referred to the International Center for Settlement of Investment Disputes at the World Bank. In February 2010, the Commission on Environmental, Economic, and Social Policy of the World Conservation Union released a report it commissioned to find information about the security situation of El Dorado project. Of special concern were the extra-judicial killings of environmental leaders opposed to the mine; continuing threats and violence toward citizens

78; suspicions of

bribery of elected officials, police and armed forces; involvement in electoral fraud79

; and the Central America Free Trade Agreement actions filed by the mining company against the government of El Salvador.

• Metallica Resources Inc. (based in Toronto) through its Mexican subsidiary Minera San Xavier was the subject of a citizen submission to the Commission for Environmental Cooperation. The matter of the submission involved irregularities in the concessions the company obtained from the Mexican Secretariat of the Environment and Natural Resources and which contravened two judicial orders to cancel the authorization of the mining project at Cerro San Pedro, San Luis Potosi. Residents in various communities had been ordered to leave their homes because explorations and open pit mining would affected human settlements, including Cerro San Pedro, an historic town already considered to be a World Heritage Site.

80

4.3 What would be the financial impact on the international Canadian extractive

industry?

It has also been claimed that Bill C-300 will negatively impact the competitive advantage of the international Canadian extractive industry

and that companies found responsible for infringing

human rights or committing environmental violations could be denied financing by Export Development Canada. This would therefore cause other lenders to reconsider their financing of Canadian companies.

81,82

,83

,84

,85

76

MiningWatch Canada, “Urgent Action: Shooting of Community Leader Opposing Goldcorp Inc.'s Marlin Mine in Guatemala; Threats Against Local Leaders Escalate.” July 13, 2010. Available: www.miningwatch.ca/en/urgent-action-shooting-anti-mining-community-leader-opposing-goldcorp-incs-marlin-mine-guatemala-thr. Accessed: October 7, 2010. 77

Richard Steiner, “El Salvador—Gold, Guns, and Choice: The El Dorado gold mine, violence in Cabanas, CAFTA claims, and the national effort to ban mining,” International Union for the Conservation of Nature, Commission on Environmental Economic, and Social Policy, February, 2010, 7. 78

Ibid., 12-15. 79

Ibid., 21-22. 80

Secretariat of the Commission for Environmental Cooperation, “Determination on Submission SEM-07-001 (Minera San Xavier),” July 15, 2009, para. 2. 81

Bourassa. 82

Enchin. 83

Peter Koven, “Mining bill needs to be defeated: industry reps,” Financial Post, November 25, 2009.

18

This raises the question, "If a company is not practicing corporate social responsibility and conducts its business unethically, should it receive funding from the Canadian government, with or without Bill C-300?”

Building the Canadian Advantage promotes the adoption of the frameworks of the IFC Policy. Therefore, it would be unethical as well as inconsistent with the OECD Guidelines or the Ecuator Principles if Export Development Canada financed or continued to finance projects that have infringed, infringe or lend themselves to a likelihood of infringing human rights or damaging the environment. The argument that this financial impact would be different under a regulatory regime as opposed to a voluntary one is therefore not relevant.

Barrick Gold is an example of a corporation already suffering fiscal consequences for failure to practice corporate social responsibility. Norwegian Finance Minister Kristin Halvorsen announced that the company had been excluded from the Pension Fund, one of the world's biggest investors, following an investigation of Barrick Gold’s activities at the Porgera mine in Papua New Guinea. The minister stated that on ethical grounds, they could not participate in funding the project because of the way the mine is run.

86

Further, it is more likely that companies reluctant to engage in international standards of corporate social responsibility will be affected by the financial reforms undertaken by foreign governments, such as the financial reform law signed by the United States.

87

4.4 Is a legal approach a punitive approach?

Another claim in opposition to Bill C-300 is that it constitutes a punitive approach that affects the entire international Canadian extractive industry, believing the Bill to hold the whole industry responsible for the actions of a few in harming local communities and seeking to punish it.

88

This argument ignores the fact that only those companies found responsible for infringing human rights or causing environmental damage will be subjected to sanctions. Companies that have an effective corporate social responsibility policy and an effective environmental management system in place need not be concerned. If accidents do occur, those companies will be best positioned to show due diligence.

4.5 Would Bill C-300 be enforceable?

It is also claimed that Bill C-300 will not be enforceable in other countries.89

In this regard, Letnar,90 Ruggie,91 and the International Council on Human Rights Policy92

,

among others comment that there is work in progress to address the need for inter-jurisdictional legislation. In addition, it is likely that, as in the example of the United Kingdom Bribery Act (discussed below), judicial processes will take place in Canada even if the complainants are foreign citizens.

84

Gary Nash, “Canada’s Very Flawed Bill C-300 Anti-Mining Legislation Should be Withdrawn,” Republic of Mining, June 10, 2010. Available: http://www.republicofmining.com/2010/06/10/canadas-very-flawed-bill-c-300-anti-mining-legislation-should-be-withdrawn-by-gary-nash. Accessed: October 7, 2010. 85

Koven. 86

John Acher and Wojciech Moskwa, “Norway oil fund expels two companies,” Reuters, January 30, 2009. Available: http://uk.reuters.com/article/idUKLNE50T05320090130. Accessed: October 7, 2010. 87

CBC News, “Obama signs financial reform law,” July 21, 2010. Available: www.cbc.ca/money/story/2010/07/21/obama-financial-reform-law.html. Accessed: October 7, 2010. 88

Bourassa. 89

Enchin. 90

see Černič, 97 for a discussion on various proposals on this matter. 91

Ruggie a, b and “Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises.” 92

International Council on Human Rights Policy (ICHRC), “Beyond Voluntarism: human rights and the developing international legal obligations of companies: Summary (Overview and Advantages of a Legal framework),” February, 2002.

19

As well, the number of environmental courts has increased worldwide. During the Second UNITAR-Yale Conference on Environmental Governance and Democracy, Professor George Pring of the Sturm College of Law at the University of Denver, stated that close to 50% of the approximately 360 existing environmental courts and tribunals in 42 countries have been created in the last two decades. He also mentioned that more countries are working on creating additional environmental courts and tribunals.

93

4.6 Bill C-300 is a private member’s Bill without attached resources

It has been considered that Bill C-300 is flawed because, as a private-members bill, it cannot supply the financial resources necessary to be put into effect.

94

In this regard, the Government of Canada could show its commitment to establish a standard for the performance of the international Canadian extraction industry on human rights and the environment by allocating resources to implement a legislative approach to complement the function of the OECD National Contact Point.

Clements states that “not breaking the law” is a minimum standard inadequate for business.95

Companies that commit to corporate social responsibility have in many instances been shown both to adopt best practices and go beyond mere compliance. However, the behaviour of foreign companies in South Africa during the apartheid regime demonstrated the need for enforcement mechanisms to ensure that businesses are run in a way that respects human rights. At that time, some companies would not adopt the Sullivan Principles if they considered any action to improve their human rights performance would threaten their business advantage. In 1985, an executive order signed by United States President Ronald Reagan banned export assistance to American companies that did not conform to the Sullivan principles.

96

The United Kingdom has taken the lead by enacting the Bribery Act97

to combat bribery in the private and public sectors more effectively, both in the United Kingdom and abroad.

98 The impact

assessment of the bill shows that it will help the British government and corporations comply with guidelines and conventions on human rights, the control of corruption, and the combating of bribery. The benefits of the Act for the United Kingdom and its corporations include the following:

99

• Bribery-savings for businesses,

• Reduction of costs for businesses and the government due to a modernized and consolidated legislation dealing with bribery offences,

• Reputational benefits for British government and businesses,

• Progress toward the public policy goal of reducing the volume of bribery and corruption as a matter of principle and because of the harmful effects experienced by developing countries,

• No negative impacts on business because of the adoption of due diligence procedures,

93

George Pring and Catherine Pring, “Specialized environmental courts and tribunals: the explosion in new institutions to adjudicate environment, climate change, and sustainable development,” paper for the Second UNITAR-Yale Conference on Environmental Governance and Democracy, New Haven, Sept. 19, 2010, 3. 94

Nash. 95

Clements. 96

Craig Forcese, “Human Rights Mean Business: Broadening the Canadian Approach to Business and Human Rights,” Working Paper for the International Council on Human Rights Policy Review Meeting, November 27-28, 2000, para. 5. 97

United Kingdom, Bribery Act 2010. 2010 c. 23.

98 United Kingdom Ministry of Justice, “Bribery Act 2010” April 12, 2010. Available:

http://www.justice.gov.uk/publications/bribery-bill.htm. Accessed: October 7, 2010.

99 United Kingdom Ministry of Justice, “Bribery Bill: impact assessment,” 2010.

20

• Assistance in deterring bribery and improving the effectiveness of the law in dealing with those who engage in bribery,

• Positive effects on society in general from the clarification and modernization of the existing bribery legislation,

• A driver for necessary change in business operations and for the further implementation of adequate procedures that will improve business processes and performance, and

• Marginal costs and/or losses for business, except for those businesses that engage in bribery (which will face more-than-marginal costs).

The existence of a law as proposed in Bill C-300 will have demonstrable benefits. The allocation by the Government of appropriate resources for enforcement will enhance compliance.

5. The Advantages of a Regulatory Approach A regulatory approach can be advantageous to the international Canadian extractive industry. As the report of the International Council on Human Rights Policy states,

…companies, campaigners and legal experts are beginning to accept that international law is relevant and the issue of legal enforcement must eventually be addressed.

100

Based on reports and actions noted above, it is reasonably anticipated that, in the short term, the emphasis on legal mechanisms to protect human rights, the environment and to combat bribery and corruption related to the operation of western corporations in the developing world will increase. As Gurría stated, “there is an obvious scope to improve not only rules and regulations but also ethical standards.”

101 The International Council on Human Rights Policy report also

describes the advantages of such a legal approach to motivate and improve corporate social responsibility and to protect human rights:

• Companies genuinely committed to respecting rights have nothing to fear from legal approaches.

• Legislation and international standards level the field for companies in a competitive world; they also provide advantages over companies that do not comply with laws and best practices.

• Some business leaders prefer obligation and clarity to voluntarism and confusion. Companies cannot easily defend themselves or prevent criticism when there is no clarity on the scope of duties.

• Laws and standards help companies rightly claim to be more socially responsible.102

The International Council on Human Rights Policy report concludes by stating that it would be short-sighted and negligent for companies and governments to ignore the trend of moving the global community toward better legislation and more enforceable international standards.

103

6. Conclusion The OECD aims to complete the updating of the Guidelines in 2011.

104 By integrating Bill C-300

with Building the Canadian Advantage, Canada would be in a position to put itself at the forefront of the emerging trend in regard to corporate social responsibility of national corporations operating internationally. Canada would also be demonstrating a commitment and readiness to begin implementing and enforcing the new Guidelines, especially with regard to human rights, through a strong mechanism that combines the voluntary nature of the Guidelines with a legal

100

“Beyond Voluntarism: Summary.” 101

Gurría. 102

“Beyond Voluntarism: Summary.” 103

Ibid. 104

“2010 update of the Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises.”

21

mechanism to be used in cases of non-compliance with standards of business ethics and corporate social responsibility.

In a research paper commissioned by the International Council on Human Rights Policy for its meeting in 2000, Craig Forcese concluded that then Canadian policy on international business and human rights was voluntary and inadequate, providing recommendations as to how to improve this policy.

105 The comments by Ruggie, Gurría and others cited above show that

voluntary approaches have not been enough to solve the social and environmental impacts of the operations of international Canadian extractive industry. The United Nations’ “Protect, Respect and Remedy” Framework specifies that states have the duty to protect citizens against business-related human rights abuses through appropriate policies, regulation and adjudication.

106

Bill C-300 would help Canada fill the gaps caused by reliance on voluntary initiatives and current legislation.

Voluntary and regulatory approaches may be complementary, and in this instance would be complementary. Most companies would likely commit to conducting their businesses ethically and set sound corporate social responsibility policies. However, for those that adopt only an image of corporate social responsibility – as opposed to a genuine ethical reform of their business practices – and for those that are reluctant to adopt corporate social responsibility and continue to focus exclusively on the maximization of profit, a regulatory approach is needed.

It is granted that as a private-member’s bill, C-300 has its limitations. Mr. McKay has recognized that it is merely “a step on the way.”

107 However, Allen,

108 Lamarche

109 and Poirier

110 express the

expectation of Canadian and foreign supporters of the bill that its passage will establish an effective mechanism of accountability for the international Canadian extractive industry, and will strengthen Canada’s credibility as a world leader in achieving the Millennium Development Goals.

The facts presented above refute the claims that Bill C-300 is unnecessary, 111

that it will undermine the trust of local authorities in Canadian companies, and that it will put the international Canadian extractive industry and the broader Canadian economy at a disadvantage.

112,113

The evidence strongly suggests that the actual source of damage to Canada’s reputation and to the breach of trust that communities and foreign governments put in Canada and the international Canadian extractive industry is in fact the persistence of some Canadian companies to continue operating unethically and without corporate social responsibility.

In his presentation at the European Business Ethics Forum, Gurría commented that “one of the main lessons of this crisis is that companies and markets can’t rule themselves. Financial innovation sacrificed business ethics for the sake of extraordinary profit.” He also stated that in light of this crisis, “the rules of the global financial and economic system will be rewritten. The incentives to proper behavior have to be included in those new rules.”

114 The findings of this

discussion paper support the argument made by Allen regarding the benefits of Bill C-300 for the international Canadian extractive industry:

• It will incorporate existing standards already in effect to enhance human rights performance and corporate accountability for mining, oil, or gas activities, consistent with

105

Forcese, para. 7. 106

Ruggie b, para. 4. 107

Graham Allen, “Bill C-300 would make Canada world leader in mining accountability,” April 5, 2010. Available: www.straight.com/article-301376/vancouver/graham-allen-bill-c300-would-make-canada-world-leader-mining-accountability. Accessed: October 7, 2010. 108

Ibid. 109

Lucie Lamarche, “Bill C-300; a road to redemption for mining companies,” Canadian Lawyer Magazine, January 11, 2010. 110

Marie-Claude Poirier, “Bill C-300. A step forward on corporate social responsibility,” May 27, 2009. Available: www.vueweekly.com/front/story/issues_bill_c300. Accessed: October 7, 2010. 111

Prospectors and Developers Association of Canada, “Bill C-300 Position Statement,” August, 2009. 112

Koven. 113

Enchin. 114

Gurría.

22

international environmental and human rights best practices and with Canada’s international commitments on those areas,

• It will improve transparency and access to justice for Canadian and foreign citizens should it be demonstrated that a mining, oil, or gas company does not comply with corporate social responsibility guidelines, and

• It will require Export Development Canada and the Canada Pension Plan to adhere to these guidelines in their dealings with the international Canadian extractive industry.

115

In addition, a publication of the Canadian Federation of University Women discusses supplementary benefits of Bill C-300:

• It is consistent with the international principles on security and human rights.

• It will provide clear requirements for Canadian government agencies with respect to extractive industry operations in developing countries.

• It will create eligibility criteria that will make it easier to receive political and financial support to the extractive industry from government agencies.

• It will establish a complaints mechanism.

• I will ensure accountability and transparency. Only companies that are non-compliant will be ineligible for government support as long as it is out of compliance with the guidelines.

116

It has been argued that Bill C-300 has room for improvement. Perhaps, it does, however it proposes law in line with recommendations existing in the international community that relying on the voluntary approach of Building the Canadian Advantage alone does not.

115

Allen. 116

Canadian Federation of University Women, “Human Rights and Mining Companies: Bill C-300 Tool Kit,” January, 2010.