Foreign Affairs Committee on May 28th, 2013

[The Chair, Conservative, Dean Allison]

You have about 30 seconds.

[Prof. Chris MacDonald]

Yes. I would just say that one of the things we have to watch out for a little bit with this issue, in the light of a tragedy like this, is to not focus entirely on Bangladesh and the particular circumstances there.

I would say also that I think one of the challenges companies like Loblaw face in all of these areas is that safety and working standards are going to be along a spectrum. In trying to figure out where on that spectrum it's reasonable to expect your factories to be and how or to what extent that dovetails with Canadian expectations, local norms, and local values, I think the answers here are not obvious.

[Bob Rae, Liberal, Toronto Centre, ON]

There's also the issue of competitive growth. We're living in an economy in which you're competing with other people who are going to be driving those market conditions all the time. I don't think anybody could sit here and from a political perspective say they have the instant answer. I think we've all recognized how much the world has changed over 50 years and the impact that it's having on all of us.

I just want to commend both of you for your statements today.

[The Chair, Conservative, Dean Allison]

Thank you very much, Mr. Rae.

We're going to start the second round of five minutes beginning with Ms. Grewal.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you, Mr. Chair. I'll be sharing my time with Mr. Harris.

While we commend Loblaw for compensating the victims, Mr. Chant, in a recent CTV story regarding Loblaw's decision to sign the fire and building safety code in Bangladesh, your company made a statement that the accord aligns with and addresses the company's commitment to a new standard that all of its control brand products must be made in facilities that respect local construction and building codes.

Please explain Loblaw's commitment to construction in light of what occurred in Bangladesh and how your company plans on sticking to this new agreement.

[Bob Chant]

We have, in the past, conducted social compliance inspections or audits. We hire a third party that is internationally recognized. We've used the two main companies that do this sort of work, Intertek and Bureau Veritas, over the past number of years. We're currently using Intertek. I don't think that's a secret anymore. There aren't as many secrets anymore with regard to this issue. They're both highly recognized and respected, and the audits that are conducted are standard throughout the industry and they cover the areas of environment, fire safety, labour, and human rights. They're conducted on an annual basis.

For the most part, we believed that these were sufficient to cover off those issues. As I said, they don't cover building inspection anymore. What we're requiring them to do now is to go back and audit all 47 of the factories that we deal with directly or that our vendors deal with, in regard to those issues and to ensure that the appropriate local building codes have been adhered to or complied with and that they have the right certification. If that doesn't exist, then we will stop dealing with that factory.

There is an ongoing challenge with regard to the authenticity of some of the certification. That's a challenge we have to deal with. Our effort, in the short term, is focused on getting these places audited and identifying which ones are high risk and which ones aren't. Then going back, and if necessary, doing a full structural integrity audit of those that are high risk. I think most of the accord players are looking at things in roughly the same way. The accord will operate in a way that ensures thorough and regular inspections of all of the factories in the country and we'll make all that information transparent. We intend to provide our information to the group so that we can get the ball rolling, and others are going to do the same thing.

Some of the other conditions that are part of the accord require that buyers help with the remediation, ensuring financing for factories that need remediation or need to move, and also ensuring that workers' wages are paid while the factory may be closed for any kind of remediation work. That worked for Loblaw. I can't speak for anyone else, but that made a lot of sense to us.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Mr. Chant, I want to commend Loblaw. It is certainly a great Canadian company. How your company has responded to this tragedy, which could not have been foreseen, is a measure of the integrity of your company. I know that you know, and your company knows, that the world will be watching—the media will be watching—the follow-up on the things that you've said.

I, for one, have no apprehensions that you're going to fail. Loblaw has shown over and over in Canada that they are a great corporate citizen. They do care about the social aspect of their operations. Good for you; you have a great company.

I also know that you probably know that your customers here in Canada are going to be watching what you're doing. I'm hoping you will keep an open dialogue with the public on the progress that your company makes through these plans and the goals you've set for yourself. I think a surprisingly larger than anticipated number of Canadians are interested in hearing how this tragedy has turned into something that will be good in the future, where Canadians will continue to be able to enjoy reasonably priced retail merchandise that is made in a way that enables them to sleep at night.

Thank you for efforts.

[The Chair, Conservative, Dean Allison]

Thank you, Mr. Harris. That's all the time we have.

We're going to move over to Madame Péclet, for five minutes.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

Thank you very much, Mr. Chair.

Mr. MacDonald, my first question is for you.

You must know about the report by Mr. Ruggie, the UN Special Representative of the Secretary General on Human Rights and Transnational Corporations and Other Business Enterprises. Are you familiar with his report?

In his report, he makes a number of findings regarding social corporate responsibility. One of his main conclusions is about the role of the state, which is required to protect us when third parties, including corporations, violate human rights within and outside of Canada.

A business that is registered in Canada is to be considered as a Canadian entity and falls under Canadian law. The state has the obligation to adopt legislation requiring that businesses respect human rights.

In his conclusions, Mr. Ruggie stated in particular that there are jurisdictional and non-jurisdictional mechanisms in place for investigations to be conducted when human rights have been violated.

Could you comment on Mr. Ruggie's conclusions regarding corporate social responsibility?

[Prof. Chris MacDonald]

Sure. I think the key difficulty that you run into with the kinds of recommendations that Mr. Ruggie put forward, which I think have been generally well received and well respected, has to do with two things—the difference between, on the one hand, respecting human rights, which pretty much everyone agrees everyone has to do, versus, on the other hand, promoting human rights. We all promote human rights. The harder question becomes how far down a supply chain is a Canadian manufacturer responsible for ensuring that human rights are respected?

So when it's not just a subcontractor, it's a subcontractor to a subcontractor, there it becomes much harder. It starts to strain our general sensibilities about what counts as fair and what counts as an action for which I or a company could be responsible, when it's far enough away that it starts to become implausible that I could have any direct control.

I think the obligation to respect human rights is clear and pretty much airtight. The other part about promoting, or there's another word he uses.... At that point it becomes much more an aspirational thing, and something where I think companies need to try to figure out just how far we can plausibly go to achieve goals that we all agree are worthy ones, but there may be practical limitations.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

In addition to the promotion of human rights, this report also states that we should ensure that international institutions do not prevent businesses from respecting human rights. In a number of free trade and other agreements, the principles of the respect for human rights have been removed. For example, in terms of trade, there is the WTO where these principles are not included.

It is therefore important that the state not only adopt national legislation, but that it also ensure that there is consistency in terms of international policy.

Would you like to comment on this?

[Prof. Chris MacDonald]

Without knowing the particular bits of legislation or international agreements that you are referring to, I think we all could agree that it's unfortunate if human rights protections are eroded. Hopefully, that's an unintended consequence of various kinds of agreements, and hopefully those are the kinds of things that we can work towards remedying.

One of the things about rights is that they are not supposed to be balanced against well-being. They are supposed to more or less be absolute. The problem comes when protection of rights starts to have significant negative impacts, which it occasionally does, though not that often. The example that came up last summer was Victoria's Secret sourcing cotton from Burkina Faso and the use of child labour, in many cases where children didn't have any other options. So their options were either to harvest cotton or engage in prostitution or something worse.

[The Chair, Conservative, Dean Allison]

Thank you, that's all the time we have.

Thank you, Madam Péclet.

Do you have just a quick question, John?

[John Williamson, Conservative, New Brunswick Southwest, NB]

I appreciate your presentation. It was very good and very helpful. The actions of Loblaw following this tragedy have been commendable.

Mr. MacDonald, I thought your presentation was insightful and very interesting.

Very quickly, I want to raise a topic that has not been touched on here—the role of corruption. China has a great constitution that guarantees freedom of the press. The Soviet Union promised political rights. I'm not suggesting Bangladesh is in the same category, but words alone aren't enough. If we have institutions that are dysfunctional, what is the responsibility of corporate Canada if they go into a country.... Across the spectrum, if you look at the corruption index, Bangladesh is at the bottom of the pack—they are the worst of the worst. They've gotten worse from 2011 to 2012.

What's the responsibility of the business community to suppliers to factor that in, when you recognize that paperwork, decisions, or commitments might not actually mean anything?

[Bob Chant]

I would simply say it is in part our responsibility, and we take that responsibility very seriously. I think that's reflected in the actions of not just Loblaw but many of the companies that have responded to this issue.

[Prof. Chris MacDonald]

I would say that I think it's an excellent question. I think the first thing to say is that, even when corruption is common in a place, that doesn't mean it's acceptable, and it certainly doesn't license Canadian companies to engage in corruption just because local business is corrupt.

As I said in my presentation, I think we have to at least open up the possibility that there should be some places where Canadian businesses just can't do business. Unfortunately, sometimes that makes things worse off. But this was famously the case in South Africa, where we all said we just couldn't do business in a place like that anymore, until they cleaned up their act.

[The Chair, Conservative, Dean Allison]

Thank you, John.

To our witnesses, thank you very much for your testimony today.

To my colleagues, that is all for today. The meeting is adjourned.