Foreign Affairs Committee on Oct. 20th, 2009

[Dr. Stephen Lucas]

I'd like to respond in several regards.

In the first instance, the government's CSR strategy and the policy foundation for it is a proactive approach of continuous improvement of industry performance, of measures to address disputes and undertake fact-finding and, as well, of fundamental improvement of the governance and institutional capacity of developing countries so they can implement and enforce the laws in their country to benefit from sustainable development of their resource wealth.

Consistent with my previous response, I'd note that the responsibility for taking action against companies that are breaking the laws or regulations of a country rests with that country itself. The dispute resolution process identified a mechanism in addition to the national contact point that will allow for further fact-finding. The transparent reporting of results, should a company be found to be in a situation where it isn't a good corporate performer, will have reputational impacts on that company. A very specific one is in the context of, again, EDC's adoption of the Equator Principles, which would result in their review of any financing they have for that company.

I believe there are mechanisms both to encourage ongoing improvement and, as well, to identify and transparently respond to concerns that have been addressed, with measures such as those through EDC that will have the effect of sanctions against the company should they be found in a position of non-compliance with the laws of that country.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Lucas.

Mr. Goldring.

[Peter Goldring, Conservative, Edmonton East, AB]

Thank you, Mr. Chairman.

My thanks to you for appearing here today.

I believe we all agree that we want to support improved legislation and greater corporate responsibility internationally. I am concerned that we seem to be fixating on one industry. I would think that we would want to encourage this kind of corporate responsibility across the board—not only within the extractive sector, but also in forestry, manufacturing, and other Canadian industries dealing internationally.

I agree with my colleague opposite, Mr. Rae, who said that this bill speaks about these improvements. But as he also said, it requires some improvements, some modifications. Therein lies my concern. This suggests that there are problems with this bill—serious concerns on Mr. Rae's part and on our side as well. The difficulty lies in identifying what those concerns are.

I note from your comments that you weren't referring to this bill; you were talking in generalities. But don't the references in this bill to international standards and rights amount to a limit on Canadian sovereignty? The bill would seem to compel corporations to adhere to international standards and rights that the Canadian government itself might not have adopted. What does it do for Canadian sovereignty if our corporations are compelled to work under such a system? Might companies wish to leave this country to avoid the problematic points in this legislation?

[Dr. Stephen Lucas]

I'd like to respond to a number of points raised in the question.

First of all, the Government of Canada, in adhering to and promoting the OECD guidelines for multinational enterprises, does have an economy-wide approach and the national contact point, representing a mechanism to both promote and address complaints associated with implementation of those guidelines by Canadian firms working in Canada, as well as Canadian corporations working abroad.

Secondly, as noted in my opening remarks, increasingly business—and in particular, businesses in the mining and oil and gas sectors working in Canada and abroad—recognize that their competitiveness in terms of access to resources and the ability to earn their legal and social licence to raise funds and be supported by shareholders requires not only economic performance but environmental and social responsibility performance against those international standards outlined by the IFC, as well as the specific laws of any country in which they operate.

In regard to your question on specific challenges in the bill, I return to the point I made that a number of carefully considered mechanisms are in place now that have arisen over the past number of years, as I noted, including the OECD guidelines and national contact point, work by industry, and then the four pillars of the government strategy, which we believe together provide a fulsome response to addressing the twin objectives of improving CSR performance, addressing challenges as they arise, and improving the governance capacity of host countries working in partnership with those governments.

The addition of a legislative approach such as envisaged in Bill C-300 would add a different dimension that we believe is inconsistent with the policy-based proactive approach to addressing those objectives, as I noted in the CSR strategy, which builds on a number of mechanisms already in place. So it's that concern that this mechanism and the complexity and cost associated with it will create the potential for confusion and duplication and not allow the collaborative, proactive approach of the strategy to move forward. It'll be really driven by meeting the minimum rules envisaged in that, as opposed to reaching for the bar of improved performance and addressing the root issue of the governance capacity challenges in developing countries.

One of the areas that the bill notes is in regard to respecting human rights and the role of corporations. Currently state conventions on human rights link the responsibility or outline the relationship between individuals and the state. The work of John Ruggie, which is still under way, mandated by the UN Secretary General, is looking at the issue of the role of corporations, but that work is not as yet complete. I think it would be very challenging for Canada to step into that area before that work is complete and addressed in a multilateral UN process that it originated from.

[Peter Goldring, Conservative, Edmonton East, AB]

So you would agree, then, on the mention in here of human rights...and not to go through what this would mean internationally, because I'm sure there are maybe dozens of different examples of United Nations agreements or international agreements and regional agreements that have been drawn up and drafted that Canada may not even have been requested to be a signatory to. It might have been done in another region of the world or whatever, but the way this bill is written, it would subscribe the Canadian corporations to adhere to standards that Canada might not even have been asked itself to subscribe to, or Canada might have been part of the drafting or part of the voting of agreements but would not agree to them. So it would compel these corporations to adhere to international agreements that Canada is not part of.

Does that not pose a huge complication?

[The Chair, Conservative, Kevin Sorenson]

Very quickly, please, because our time has just eroded.

[Dr. Stephen Lucas]

As I noted, the government strategy identifies the Voluntary Principles on Security and Human Rights as one of the performance standards for industry to follow. Canada has applied to join and has joined those. The Equator Principles, which guide the investment risk analysis and decisions of EDC, consider that as well.

As I noted, the international human rights conventions, and their applications and states, fundamentally are between the state and individuals. Recognizing the challenge around the role of corporations, the UN Secretary General mandated work to John Ruggie, who has provided an initial report, but that work is not complete as yet.

I would just note that we've ratified almost all UN human rights treaties and we'd be happy to ask our colleagues at the Department of Foreign Affairs and International Trade to provide a more fulsome written response to the question.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Lucas. You can have that submitted at any time.

Mr. Dewar.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Chair.

Thank you to our guests.

I note that I think you just said no to Mr. Goldring.

When I look at the proposal we have in front of us, and we look at what the government is doing--and I appreciate the fact you're a public servant, so your job is to carry through with what your political masters ask of you--I'm not going to ask your opinion, but I want a status report of the process we have in front of us, as you outlined it.

And I have to say—I can give an opinion, so I will—that the process of the round table, and what we were hoping for and people were waiting patiently to see, was to have an ombudsperson put into a position where they would be able to hear complaints and to arbitrate where to go. I think the spirit of this—and a private member's bill has limitations, you can only go so far—doesn't do that. But I think Mr. Rae was going in the direction, which was a little different from what Mr. Goldring was maybe suggesting Mr. Rae was going, in which we could use what the government has put in place with Bill C-300 and move things along--evolve.

I wanted to clarify with you, and for people who are listening and going to read the blues on this, that Bill C-300 does provide a mechanism so concerns can be heard and a process put in place to deal with them. Can you explain to me right now the proposal the government has put forward? If one party doesn't want to involve itself in the process, can the process go ahead? In other words, is it incumbent upon both parties to take part in this dispute resolution process?

[Dr. Stephen Lucas]

I'll answer your specific question first, and then respond more generally to some of the other points you raised.

Indeed, the definition of the role and responsibilities of the extractive sector counsellor--proceeding with the process outlined from assessment to informal mediation, fact-finding, access to formal mediation, and reporting--does require the consent of the complainant and the organization or individual complained about.

[Paul Dewar, NDP, Ottawa Centre, ON]

I don't mean to interrupt, but just to be clear here so people know, the process that's set up right now.... If, let's say, a group comes forward with concerns about a company, puts it forward, and the company decides it doesn't want to take part in the process, then the process stops right there. Is that correct?

[Dr. Stephen Lucas]

Correct. I guess the two things I would note are that that would be reported, because of the commitment to transparent reporting, and then second, I think the great majority of companies would want to participate because of the transparency.

[Paul Dewar, NDP, Ottawa Centre, ON]

Of course, I'm just saying the process is such that they don't have to, and if they don't, it doesn't go forward.

[Dr. Stephen Lucas]

No, but there is transparent reporting and the fact that a complaint was made and that it wasn't addressed....

And again, more fundamentally, with regard to the round table report, the responsibilities of the CSR extractive counsellor are substantively similar to those envisaged for the ombudsman. There was an additional process of a tripartite review committee, which wasn't included in the government strategy.

I think, as I had noted, keeping in mind the objectives I've outlined--continuous improving performance and addressing ways to strengthen the governance capacity of developing countries--that the opportunity, building on the information already collected by the OECD national contact point, to document and have a body of evidence obtained through the dispute resolution mechanism and work of the extractive sector counsellor will provide the basis for a substantive consideration at the time of review, four and a half years hence, as to whether this is a necessary and sufficient mechanism to address challenges.

[Paul Dewar, NDP, Ottawa Centre, ON]

Yes, I know. I've read it, and I appreciate your helping us with that.

I want to put some things in context. You're aware of other jurisdictions that have taken other initiatives to deal with the extractive industries and CSR. Norway has, through its pension plan, withdrawn its investments in a Canadian extractive industry because of its concerns. I'm sure you are aware of that instance.

Right now going through Congress is a bill that is looking at tagging coltan in the Congo. Would it be fair to say that Canada isn't alone in wanting to engage with initiatives on corporate social responsibility?

[Dr. Stephen Lucas]

I'd agree that over the past decade this has been an area of interest for multilateral groups, the World Bank, and other countries as well as Canada.

[Paul Dewar, NDP, Ottawa Centre, ON]

And we've been leaders. I recall that the Kimberley Process wasn't embraced by everyone when it was first put out there. Is that correct?

[Dr. Stephen Lucas]

It resulted from an international multi-stakeholder process. In the context of that situation, it was the right thing—

[Paul Dewar, NDP, Ottawa Centre, ON]

And people were able to adapt.

[Dr. Stephen Lucas]

—and Canada supported it. But in regard to your comment about Norway and their pension plan, the Canadian Pension Plan Investment Board has a policy on responsible investing. EDC has adopted—

[Paul Dewar, NDP, Ottawa Centre, ON]

I acknowledge that.

[Dr. Stephen Lucas]

—the Equator Principles.

[Paul Dewar, NDP, Ottawa Centre, ON]

Has the EDC ever withdrawn support from an existing partner on that basis?

[Dr. Stephen Lucas]

I'm not able to respond to that, but we could follow up with EDC and get an answer for you.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you.