Global CSR Monitor - Canada's CSR Counsellor: Open for business

November 23, 2010 Author: Michael Torrance

Contacts

Introduction

The Office of the Extractive Sector Corporate Social Responsibility Counsellor (“CSR Counsellor”) opened for business on October 20, 2010. This new Government of Canada dispute resolution mechanism represents an important and very unique development affecting the legal and risk management practices of Canadian mining and oil & gas companies doing business abroad.

Mandate and objectives

The CSR Counsellor is an appointee and advisor to the Government of Canada’s Minister of International Trade. The CSR Counsellor’s office was created and defined by a Parliamentary Order in Council.1

In essence, the CSR Counsellor’s office will serve as a dispute resolution mechanism similar to that of an ombudsman. The scope of the CSR Counsellor’s mandate extends to all Canadian (incorporated or head office in Canada) mining and oil & gas companies with operations outside of Canada.

The role was established in 2009 as part of the Government of Canada’s CSR Strategy for the International Extractive Sector, aimed at the promotion of best practices in Corporate Social Responsibility amongst Canadian oil & gas companies. Broadly speaking, the strategy is designed to help Canadian mining, oil & gas companies meet their “social” (including employment & labour, health & safety, human rights, community relations, aboriginal issues) and environmental responsibilities when operating abroad, in order to preserve and improve upon the reputation of the industry and maintain access to international markets.

The first appointee to the role is Marketa Evans. Dr. Evans has a background in international relations and is the former Executive Director of the Munk School of Global Affairs at the University of Toronto, and Director of Strategic Partnerships at Plan Canada. She is widely regarded as an expert in corporate social responsibility.

The CSR Counsellor is required to apply a set of international standards relating to the social and environmental practices of companies. The expressly endorsed standards to be applied by the CSR Counsellor include the International Finance Corporation Environmental and Social Standards (the “Performance Standards”),2 the Voluntary Principles on Human Rights and Security,3 and the non-financial reporting frameworks of the Global Reporting Initiative.4

A Request for Review can be accepted by the CSR Counsellor from any person or community (or their representative) in the world (outside of Canada) who “reasonably believes” that they are being or may be adversely affected by the operations of a Canadian extractive sector company, contrary to the performance guidelines that the CSR Counsellor is required to apply. Canadian extractive companies can also bring matters forward if they believe they are the subject of unfounded allegations concerning their corporate conduct in relation to the applicable standards. 

Footnotes

  1. Terms and conditions governing the appointment of a special adviser to the Minister of International Trade, to be known as the Extractive Sector Corporate Social Responsibility Counsellor, who may be appointed by the Governor in Council under paragraph 127.1(1)(c) of the Public Service Employment Act, P.C. 2009-0422, (May 26, 2009).
  2. International Finance Corporation, online: IFC Sustainability - Environmental and Social Performance Standards, online: <http://www.ifc.org/ifcext/sustainability.nsf/Content/EnvSocStandards>; It should be noted that new Performance Standards are due to be released in 2011, but that the current Performance Standards will continue to be applied by the CSR Counsellor.
  3. Voluntary Principles on Security and Human Rights, online: The Voluntary Principles <http://www.voluntaryprinciples.org/principles/index.php>.
  4. Global Reporting Initiative, online: Reporting Framework http://www.globalreporting.org/ReportingFramework/.
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Rules of procedure

Rules of Procedure have been established setting out the procedure to be followed once a “Request for Review” has been submitted to the CSR Counsellor.5

Once received, a Request for Review will undergo an “Initial Assessment” phase and screening process. A preliminary determination of “eligibility” will be made by the CSR Counsellor, based on considerations such as the amount of time that has elapsed (complaints must be related to incidents occurring on or after 19 October 2009); the nature and seriousness of the issue; whether the request was made in good faith; whether other processes have been exhausted; and whether the issue is substantiated.

Following the Initial Assessment, the parties will be invited to undertake an “Informal Mediation” which may involve information gathering, research, the engagement of experts, discussions and efforts at conciliation. A “Trust Building” exercise may follow, to permit the parties to provide context to the issues raised. The express written consent of the parties will be required to undertake the Informal Mediation, which may be withdrawn at any time with notice. As the process unfolds, terms of reference will be created in collaboration between the parties and the CSR Counsellor, and expressed in a Letter of Intent. If “no progress” is made at this point the CSR Counsellor may terminate the process at their discretion. If “some progress” is made, the CSR Counsellor will continue to engage as appropriate. If “progress” is made the CSR Counsellor may move to a “Structured Dialogue” phase. If the process ends, a “Final Report” will be released by the CSR Counsellor.

If undertaken, Structured Dialogue will involve further efforts at consultative discussion aimed at resolving the dispute between the parties. This process will either result in “no resolution” whereby the process may be terminated at the discretion of the CSR Counsellor; or to formal mediation; or resolution with a set of commitments adopted by participating parties. If the process ends at this stage a Final Report will be published by the CSR Counsellor. If formal mediation will be entered into, a publicly available interim report may be made by the CSR Counsellor.

In certain cases, the CSR Counsellor may recommend a process of formal mediation conducted by an external mediator once the foregoing process is exhausted.

At the end of this Review Process a report will be issued by the CSR Counsellor. Such reports will be publicly available on the CSR Counsellor’s website and may be shared with the Minister of Natural Resources as well as with the Minister of International Cooperation. It will describe the process and the outcome, and may be used as a tool to educate the industry on best practices.

Fact finding may be undertaken by the CSR Counsellor at any stage of the Review Process. Fact finding may include the use of independent third parties, or even be conducted by the parties themselves, in order to improve understanding of the issues giving rise to the dispute, with an eye to resolution. Procedural issues and the desired way forward may also be discussed in this Review Process.

The Rules of Procedure will be in effect until October of 2012, at which time they may be subject to review. ’

Footnotes

  1. Rules of Procedure for the Review Mechanism of the Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor, October 20, 2010 (valid until October 2012), online: <http://www.international.gc.
    ca/csr_counsellorconseiller_rse/assets/pdfs/Rules%20of%20procedure%20FINAL.pdf
    >.
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Is the CSR Counsellor review process a legal process?

While the Review Process of the CSR Counsellor is voluntary, there are inevitable business and reputation risks that would affect any company that is the subject of a Request for Review. There are also clear legal risks associated with the investigation of corporate conduct, and the public reporting of information. While confidentiality is to be respected by the CSR Counsellor, there will certainly be legal questions that will arise from the CSR Counsellor’s use and possible release of corporate information. These features ought to make the CSR Counsellor and the endorsed Performance Standards of particular importance to in-house legal counsel within the extractive sector.

The nature of the Review Process is also such that legal counsel and advice will be valuable in assisting companies to navigate Requests for Review made to the CSR Counsellor. The process, while unique in many ways, is similar to dispute resolution processes established pursuant to certain commercial contracts (such as project financing governed by the Equator Principles) and by multinational organizations like the Organization for Economic Cooperation and Development or the World Bank. The Review Process is also rather formalized and will inevitably be managed similarly to an administrative legal process, analogous to a mediation or ombudsman, and employ processes of legal reasoning to analyze and resolve disputes. As such, there are procedural similarities between the CSR Counsellor mechanism and more traditional legal processes that will be familiar to legal counsel versed in these areas.

Moreover, the CSR Counsellor’s office has been created by the Government of Canada, which has also specifically endorsed certain social and environmental performance standards that will be used to evaluate corporate conduct. While endorsement of this sort does not make the endorsed standards "binding" per se, it sets the benchmark that the Government of Canada expects the Canadian extractive sector to meet. Such endorsement will serve to encourage the internalization of such standards across the extractive industry and legitimize their use as the standard by which social and environmental performance is assessed, both by government and by other social actors.

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Stay tuned

These new developments in the formalization of Corporate Social Responsibility should be understood as having real legal implications that give rise to risks and opportunities for the corporate organization. While in its infancy, the evolution of the CSR Counsellor’s office should be of great interest to legal and compliance personnel across the Canadian extractive industry. To mitigate risks and capitalize on opportunities as they emerge it will be important to monitor the development of this new process and also to be mindful of other new efforts to operationalize the Government of Canada's CSR Strategy for the Extractive Sector. Watch this space.

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