Corporate Social Responsibility

The National Post is Canada’s second largest national paper.

The rising potential of human rights cases and securities class actions, along with some new Canadian government regulations, show that if a company pays lip service to corporate social responsibility, it does so at its peril.

Indeed, lawyers tell me it’s becoming standard for them to include a review of a target company’s public statements on CSR when they conduct their pre-transaction due diligence.

Digest that thought for a moment. Grandiose statements on CSR that might have once been dismissed as mere public relations fluff are now becoming red flags that could threaten pending M&A deals.

Due diligence traditionally focuses on flagging the legal risks that might emerge from a company’s contracts or financial obligations. A target company might express support for a set of voluntary third-party CSR protocols, but not give them much legal weight because they’re not binding contracts or laws enforced by a government.

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The Northern Miner, first published in 1915, during the Cobalt Silver Rush, is considered Canada’s leading authority on the mining industry.

Corporate social responsibility (CSR) is increasingly important to successful business operations. Yet CSR initiatives are often developed without attention to possible liability under anti-corruption laws.

CSR once referred primarily to a company’s voluntary philanthropic projects, such as donating to a local charity or building a school. While these types of projects are still important, today the term CSR refers more broadly to a corporate responsibility to understand and address the various impacts a company’s operations may have on its stakeholders in the economic, social and environmental spheres, as well as their relationships in the workplace, the marketplace, the supply chain, the community and the public policy realm.

An example of this newer concept of CSR is set out in the widely endorsed UN Guiding Principles on Business and Human Rights. These “Guiding Principles” state that businesses have a responsibility to respect all internationally recognized human rights by avoiding infringement on the human rights of others, conducting due diligence to monitor rights impacts and addressing adverse human rights impacts that may arise out of their operations.

CSR and anti-corruption initiatives are often approached differently both conceptually and within companies, yet they are linked.

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Russell Noble is the editor for the Canadian Mining Journal, Canada’s first mining publication.

Later in this issue you’ll see and hopefully read a new column by Michael Torrance, a lawyer with Norton Rose Fulbright of Toronto, who specializes in Corporate Social Responsibility, or CSR as we all call it.

In his inaugural column, Michael talks about the Government of Canada’s new strategy for the “Extractive Sector,” (that’s us, the mining industry…. “Extractors”) and the consequences mining companies will face if they don’t follow the rules as set out in the government’s new CSR Best Practice Strategy.

Without taking away from Michael’s column, I won’t go into detail about the new Strategy or how the government plans to slap the wrists of those who don’t follow the rules, but I would like to comment on CSR in general and perhaps why some companies have found it frustrating to spend money on CSR and why they’re reluctant to participate.

As we all know, mining takes a lot of promotion and salesmanship when it comes to convincing communities and their inhabitants to accept that the landscape in their backyards is going to change drastically once a mining company moves in.

In fact, it’s safe to say that in most cases, it will be scarred for life because no matter how you look at it, the definition of extract (in part) is to: “Take out by force” and as “Extractors,” that’s what miners do.

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The National Post is Canada’s second largest national paper.

Almost half a century ago, Milton Friedman noted that “Corporate Social Responsibility,” CSR, was a subversive concept designed to facilitate open-ended political interference in business.

The Harper government’s recent announcement of an “enhanced” CSR strategy for mining — “Doing Business the Canadian Way: A Strategy to Advance CSR in Canada’s Extractive Sector Abroad” — would appear to confirm the great economist’s misgivings. In fact, the Harper strategy is designed to reduce irresponsible interference, not facilitate it.

The core belief of CSR advocates is that companies are greedy exploiters who don’t “do good” without arm twisting. That applies particularly to investment in poor countries. Business is indeed critical to solving problems of poverty and disease, but primarily by creating employment, sourcing locally, building communities and producing commodities and products that make peoples’ lives better.

What makes poor countries poor is incompetent governments and erratic policies, particularly when it comes to foreign investors. The Harper government has addressed that issue directly via the 24 Foreign Investment Promotion and Protection Agreements (FIPPAs) it has signed since 2006. The CSR weapon is another, if related, problem.

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