The demand for the adoption of CSR guidelines in Canada was a response to the need for better ‘certification’, intending to ensure and reinforce the legitimacy of the operations of Canadian companies in the extractive sector. The CSR initiative came at a time of mounting pressure from an increasing number of alleged violations of human rights and negative social and environmental impacts involving Canadian companies. Public awareness of these issues has been on the increase and culminated in the 2005 unanimous Report from the all party Standing Committee of Foreign Affairs. The report called for firm measures including the withdrawal of public support to a company operating in the Philippines (GoC, 2005). This context and the multiple forms of public support given to Canadian mining companies operating abroad, underline the timeliness of an evaluation of the current situation. It is important because of the apparent reticence of the Government of Canada (GoC) to accept the recommendations resulting from the Canadian National Roundtables. This involved an extensive process of public consultation and I examine whether the proposed recent recommendations go beyond past initiatives in this area with regard to clarifying the social and political responsibility of the actors concerned.
There are several contemporary tendencies that need to be examined to help contextualise issues related to mining, regulation and the state (Campbell, 2006a). The first of these is the process of reform of regulatory and legal frameworks favouring greater harmonisation and stability in the mining sector in Africa. This process was carried out at the instigation of the Bretton Woods Institutions (BWI) over the last 20 years (World Bank, 1992; Campbell, 2004, 2006b). The reforms were intended to create a more favourable environment for foreign investment and they entailed a process of redefining the role of the state ‐ a process so profound it has no historical precedent. In this context, the introduction of new fiscal and regulatory frameworks had the effect of driving down norms and standards in areas of critical importance for social and economic development, as well as the protection of the environment. The second contextualising issue is that the externally driven reform process may well have contributed to undermining the legitimacy of the governments of mineral rich countries (UNRISD, 2000). Third, economic reforms and mining policies more specifically, have not sufficiently contributed to building effective and accountable states representing and responding to the needs of their population ‐ an essential element to improve the peaceful management of potential conflict. Fourth, there has been insufficient capacity in Africa and elsewhere to monitor and implement regulations. This may lead to the potential by‐passing of governments as key regulatory agents and consequently further undermine their legitimacy. Finally, where there have been conflicts or potential conflicts, mining companies have turned to private security companies or co‐opted armed groups to protect installations, further undermining the legitimacy of states. It has also contributed to greater insecurity for mining activities (Commission for Africa, 2005; Campbell, 2006a).
Regulation & Legitimacy in the Mining Industry
The regulation of conflicts between transnational mining investment and local communities has recently been examined through national, transnational and local legal processes (Szablowski, 2007). This study has explored especially the operation of a transnational legal regime managed by the World Bank Group (WBG) intended to remedy the social and environmental impacts of projects which receive WBG assistance. Szablowski allows a resetting and evaluation of the Canadian experience. His contribution enables analysis of a proposed certification process proposed by the transnational legal regime on the one hand, and de‐certification resulting from growing resistance by those affected by mining activities on the other.
The first key issue here is the redefinition of the role and functions of the state as well as the new delineation between public and private spheres of authority. In the policy environment of the 1980s and 1990s and under the leadership of the WBG,
the new agenda advocated comprehensive privatisation of state companies, an end to restrictions on foreign ownership and the repatriation of profits, lowering rates of taxation and royalties, restructuring labour laws to permit greater flexibility, and the termination of performance requirements such as those mandating local sourcing or local hiring. In addition, mining legislation had to be rationalised, administrative processes simplified, technical services to the industry (such as modernisation of the mining cadastre) improved and ‘subjective’ elements of bureaucratic discretion removed from the permitting and approvals processes (Szablowski, 2007:34).
The World Bank (1992) made it very clear that the role of government was to create a suitable environment for the private sector. This required,
A clearly articulated mining sector policy that emphasises the role of the private sector as owner and operator and of government as regulator and promoter (World Bank, 1992:53, emphasis added).
As Szablowski noted, government was to stop ‘being an owner‐operator pursuing social or political goals through its operational involvement in the mining industry’. Instead, governments were encouraged ‘to become efficient and “apolitical” regulator[s]’ (Szablowski, 2007:34); their role was to facilitate private investment. The myriad of policy that the World Bank promoted through the package of privatisation and liberalisation reforms was accompanied by the assertion that the early reformers were ahead of their competitors. Africa's experience over 20 years has been a cumulative process of reform leading to several generations of increasingly liberalised mining regimes (Campbell, 2004).
States had enormous difficulty responding to pressures circumscribed by the legal and practical conditions to attract foreign investment. The lack or little room to manoeuvre led some states to respond to, if not reconcile, competing internal and external pressures involved in ‘a formal award of rights to the investor accompanied by an informal delegation of local regulatory responsibilities.’ It led states to the ‘transferring [of] legal authority to mineral enterprises to manage social mediation’ (Szablowski, 2007:27). Another coping strategy adopted by states to deal with new mining regimes was one of ‘selective absence’. The state basically ‘absented itself from substantial parts’ of the legal regimes intended to help ‘mediate between investors and community interests’ (Szablowski, 2007:28, 45).
One of the consequences of liberalisation of the African mining sector has been the way in which past public functions of the state have increasingly been delegated to private operators. These include service delivery and also rule setting and implementation. The tendency has been for ‘an increased (and often reluctant) assumption of state‐like responsibilities by transnational mining enterprises at the discreet behest of weak governments’ (Szablowski, 2007:120, 59).
There are two further problems with the programmes reforming the certification of the mining sector: the narrowing of political space and the risk of undermining state legitimacy. The external origin of the reform process responsible for the new regulatory frameworks introduced into African mineral rich countries may well have had other far reaching implications, to which little attention has been paid, related to issues of state accountability and state legitimacy. UNRISD noted in an important study certain dangers of such trends:
Pressure to standardise macroeconomic objectives encourages governments to restrict policy making to experts and insulates key economic institutions from democratic scrutiny (UNRISD, 2000:1).
These objectives included conservative fiscal policies, privatisation, and open trade and capital accounts, all of which reflect an acceptance of price stability as the primary concern of macroeconomic policy. Democratisation can be affected by this process in two ways: First, it may distort the structure of accountability by encouraging national authorities to be more responsive to financial markets and multilateral institutions than to fledging parliaments and citizens. Second, social policies, which were crucial in consolidating Western democracies, may be treated as residuals of macroeconomic policy, and democratisation that does not conform to economic orthodoxy dismissed as populism (UNRISD, 2000:1–2).
The potential results may be significant. There may be an erosion of public confidence in the legitimacy of domestic institutions if their actions are dictated by external agents. It is also possible that the growing trend towards the creation of autonomous public authorities that check the discretionary powers of governments in key areas of policy‐making might accelerate. Institutions that are potential candidates for autonomization include central banks, trade and finance ministries, tax administration offices, independent courts, electoral bodies, and ombudsmen.
It is important to see how these trends might affect political processes. As UNRISD notes:
Technocratic approaches to making economic policy may affect the way governments respond to the concerns of citizens and elected representatives on such issues as employment, social protection and poverty eradication (2000:3).
The study noted that if the fiscal authorities are independent, there is a risk they will be more responsive to market dictates than to the needs of the electorate, or, indeed, the electoral cycle. Redistributive pressures may directly conflict with the social policies favoured by civil servants as they seek to control expenditures, meet multilateral loan obligations, and attract private capital. New public management reform promotes an improvement of public sector accountability, primarily by increasing managers’ freedom to manage. To achieve this, it is commonly argued, policy‐making must be kept separate from service delivery, ‘which becomes the responsibility of executive agencies’ (UNRISD, 2000:4). Finally, the costs of technocratic regulation itself must be taken into account. The UNRISD report argues that in a technocratic political process, technocratic groups are insulated from external pressure. One potential consequence is that the content of policies may well be determined by rules that are context‐indifferent; that is, policy‐making will be separate from policy implementation. Using the social sector as an example, the study concluded, amongst other things, that,
technocratic decision making has resulted in the ‘technification’ of social and political problems. In other words, poverty and social inequalities have been transformed into technical terms, with emphasis on targeting and safety nets … There are increasing demands for expertise in the social sector. However, there is less participation in the administration of targeted social programs, with the World Bank and national technocrats setting the agenda and maintaining overall control (UNRISD, 2000:6).
Debates over the relationship between technocracy and political process are not new, and there is every reason to suppose they will continue. The point is that differing views about the role of each may be marginalised or even muzzled when technocracy is imposed from outside and when the parameters of domestic debate about institutional reform are set in advance. The outcome may well be a ‘depoliticisation’ of social and economic issues as a result of the ‘technification’ of terms in which they are discussed.
There has been a process of the standardisation of norms whether these concern economic efficiency or social issues. Since the mid‐1980s, the multilateral financial institutions have assumed a leadership role in suggesting the direction and the degree of reform to which countries must comply. Moreover, in the context of global economic liberalisation, these rules emanate less and less from the national arena and increasingly from multilateral institutions and frameworks (Campbell, 2000). The trend towards the transnationalisation of rules and norms reflects not only a redefinition of the locus of the production of these norms, but also a shifting and a redefinition of the boundaries which delineate the public and the private spheres, the political and the technical (Deblock & Brunelle, 1999).
Current tendencies involve a process of the redefinition of the role of the state and potentially a reduction of its redistributive powers. The result is an altering of its capacity of democratic response as a consequence of the acceptance of economic reforms intended to be long term and binding in nature within and across political jurisdictions. Although according to Teivo Teivainen (2002:189), ‘When politically crucial decisions are transferred to the "economic" sphere in the globalisation process, the inherently political nature of the economic should, in principle, become more transparent,’ this is often not necessarily the case. The usefulness of such an approach is to draw attention to the new constitutional norms or new normative frameworks which result from economic reforms. Although presented as neutral, under certain circumstances such new norms have precedence over democratic norms, a process which Teivainen describes as ‘the transnational politics of economism’ (2002:17). This process has also been analysed from the perspective of legal pluralism which, as Szablowski argued, offers a particularly effective vantage point from which to examine the dynamics of legitimation, its connection to regulation, and its pursuit both inside and outside state structures.
The second important issue to note is that with globalisation the state has difficulty in offering legitimacy through legal processes:
For example, mining enterprises operating in the Global South are not able to respond to their critics, either locally or transnationally, with the simple assertion that their responsibilities begin and end with compliance with a host state's legal requirements. It may be that in a globalising era, for many audiences, states appear too weak or too complicit to offer a convincing check on the actions of corporate giants. Or perhaps, curiously, the retreat of the state from the mediation of socio‐economic relations has left private enterprise increasingly subject to social claims (Szablowski, 2007:60).
The result has been that ‘the transnational dimension of legitimation brought on by globalisation has prompted the development of global policy arenas and has sparked the need for transnational law making, with far reaching consequences’ (2007:60). What is being debated through the resulting ‘global legal politics’ concerning the rights and obligations of enterprises ‘is the regulatory terms on which different audiences are willing to find that the entitlements of transnational enterprises will be deemed legitimate’ (2007:65). However, and as illustrated in the Canadian process described below, only third party certification backed by solid performance requirements can offer credibility. Nonetheless
the willingness of industry actors to adopt more independent and rigid forms of certification is directly related to the perceived level of threat that civil society is able to exercise over that industry (Szablowski, 2007:70–71).
The mining industry has increasingly recognised that it was losing an important battle for public opinion and would be faced with a legitimacy problem if nothing were done. Looming large was a profound state crisis in many of the countries where many enterprises operated, a problem of the sovereignty of states and consequently, a problem of legitimacy of the operations of mining enterprises. Industry initiatives have been characterised by the Global Mining Initiative in 1998, the Mining, Mineral and Sustainable Development project (MMSD) or the Sustainable Development Framework of 2003, issued by the successor to the International Council on Metals and the Environment (ICME), the International Council on Mining and Metals (ICMM). The BWI have assumed the lead with regard to mining industry certification efforts. The uniqueness of the WBG's position as a powerful lending institution and promoter of private investment, as well as the resources it has been able to mobilise1 explain the BWI success in formulating a regime capable of achieving its strategic objectives and becoming a site of global norm production.
Over the last fifteen years the WBG has developed an elaborate set of standards in a wide variety of areas, whether with regard to environmental impact assessments (EIA), involuntary resettlement (IR), which, as Szablowki suggests, collectively can be seen as the WBG safeguard policy regime. Since the 1990s, private sector projects that received assistance from the International Financial Corporation (IFC) or the Multilateral Investment Guarantee Agency (MIGA) increasingly came under outside scrutiny. In the 1980s, the IFC had no formal environmental or social approach or capacity. Environmental reviews of IFC projects were outsourced to the World Bank. During the early 1990s, safeguard policies were used as non‐mandatory guidance for project preparation. In 1998 and 1999 respectively, IFC and MIGA adopted their own mandatory safeguard policies, using in most cases text identical to that of the IBRD/IDA (Szablowski, 2007:94).
While the body of these continually evolving standards is obviously very detailed and substantial, these transnational norms and practices raise three difficulties. The first is the preference for technocratic over political legitimation processes among project sponsors and corporate‐oriented transnational law‐makers, such as MIGA and the IFC (Szablowski, 2007:300). This option raises problems of legitimation which have not yet been addressed. For in the routine application of its social provisions, the WBG safeguard policy regime lacks the oversight required to ensure that its goals are being achieved. The second difficulty relates to the forms of participation which accompany the implementation of the WBG safeguard policy regime. Szablowski illustrates this issue with regard to the controversial policy of Involuntary Resettlement (IR). The argument made is that IR Policy represents a normative change as compared with former state legal regimes. This is because of the manner in which the various responsibilities for policy implementation, including fact‐gathering, local consultation, resettlement plan design, are assigned to the project sponsor. As a result, the form and content of the involvement of project affected people are determined by the companies participating in the process and their input is mediated by the supervising agency via the company's reports. Thus ‘project‐affected persons … are not parties to the private contractual relationship that exists between the WBG agency and its client.’ They are therefore denied rights of access to information and decision making that affects their IR (Szablowski, 2007:119–20).
Finally, the emergence of a body of norms and standards that have their origin in the multilateral arena as in the Environmental Impact Assessments (EIAs), legitimises the operation of private operators while imposing relatively limited regulatory responsibilities on governments. These may allow governments to shift the locus of responsibility for what were previously considered state functions (clinics, roads, infrastructure, etc.) to the private operators of large‐scale mining projects. This trend can be documented in a wide range of situations whether with regard to Ghana, Mali or the DRC (Keita, 2007; Belem, 2004, 2008 forthcoming; Mazalto forthcoming 2008). Such a transfer however, not only silences the legitimate and indeed necessary right of governments to offer services to their populations, a precondition to their being held publicly accountable, but also, contributes to obscuring the issue of government responsibility itself. Referring to one aspect of this broader process, EIAs, Szablowski notes that their most significant feature
is that it does not have any mechanism for fixing the ‘social responsibility’ of government’… ‘The decision‐making architecture of EIA provides no place for discussing the issue of governmental responsibility for social and environmental burdens that will not be assumed by the project proponent’ (2007:57).
With the WBG safeguard policy regime, the locus of responsibility is left essentially with private actors while the complex issues of reinforcing regulatory capacity of states or developmental objectives are not addressed. The danger which arises is that while certification institutions will help to legitimate corporate entitlements, much less attention has been paid to the issue of weak regulatory capacity of the states concerned and the consequences for the legitimacy of the new institutions and practices, notably due to the externally driven nature of the ‘certification process’.
Having provided some background to explain why the need for better ‘certification’ has become such a contemporary issue I will now assess the extent to which a recent initiative to set out Canadian performance standards for Canadian enterprises, addressed key issues of legitimacy, participation and political responsibility in the mining sector.
Canada's Response: Regulation & Legitimacy
The recent Canadian government initiative concerning CSR in the extractive sector may be seen as a response to increasing concern, both within the public and parliamentary committees, regarding the alleged negative impacts of Canadian mining companies operating in the Global South. Although the issue of CSR addresses only ‘the tip of iceberg’ of the broader set of issues raised by resource exploitation (Akabzaa, 2004, 2008 forthcoming; Aryee, 2001; Campbell, 2004), the recommendations which resulted from the Canadian National Roundtable process merit close attention. This is because beyond their significance as concrete proposals in answer to issues of accountability and responsibility, they may be seen as part of a cumulative process of broadening the space for communication and political debate in this area. The widely followed public consultations which took place were a critical component of a process which had the potential to contribute to reinforcing ideas of legitimacy and regulation. Furthermore, the Report produced in 2007 was presented as a step in an ongoing process and pointed in its conclusions to areas where work should be continued and consequently where the ‘communicative process’ might be deepened.
The contemporary context, unlike the 1980s has been characterised as the ‘selective absence of states’. Civil society organisations have played a critically important role in identifying and maintaining attention on key issues such as environmental and social impacts. These might otherwise be dismissed if considered at odds with the interests and perspectives of corporate actors driven by shorter term imperatives of market competition. The role of civil society organisations is increasingly recognised by both public and private actors as an essential component of discussions concerning certification schemes. This is illustrated by the central place they occupied in the Canadian Roundtable experience.
A number of key recommendations in the Report of the Advisory Group submitted to the Canadian Government in March 2007 need to be examined carefully. The first is the issue of the weak regulatory capacity of many of the governments of the countries in which Canadian mining companies are operating. This raises the question of the shared responsibility of the countries of origin of mining enterprises. The second concerns examining the extent to which the initiative concerning better certification gave preference to technocratic legitimisation processes as opposed to political ones. This implies broadening the notion of political and social responsibility beyond a technocratic formulation and consequently, formulating recommendations which clarify the political and social responsibility of the actors concerned. Third, there is a need for more meaningful forms of consultation, reporting, monitoring and, where necessary, the introduction of remedial measures, involving those affected by the activities of Canadian companies.
There is also the need to consider the implications of the forms of consultation process which took place through the Roundtables. Notable in this regard was the importance of the role of the public hearings, where members from civil society ‐whether from communities affected by mining or from Canada ‐ and of expert witnesses could be heard. The capacity of these hearings to bear weight on the recommendations of the Advisory Group and in this manner to reinforce a ‘communicative process’ certainly contributed to the vitality of emerging ideas of legitimacy around these issues.
The Canadian Extractive Sector
There are more than 1,000 mining companies listed on Canadian stock exchanges, more than in any other country. The vast majority of these are exploration or junior companies (Natural Resources Canada, 2006a). Among Canada's goods‐producing sectors, Canadian mining companies listed on Canadian stock exchanges are the largest outward investors, with interests in more than 8,000 exploration and mining properties in over 100 countries around the world. Canadian projects include over 200 mines, smelters, refineries, plants under construction, and other advanced mineral projects. Canadian‐based companies conduct around 40 per cent of all mineral exploration undertaken in the world. Canada's minerals and metals industry accounts for approximately C$50 billion or about 12 per cent of all Canadian direct investment abroad. According to Natural Resources Canada, outside South African investments, companies registered on Canadian stock exchanges now represent the most important source of investment in mining in Africa.
From a total amount of approximately C$6 billion in 2005, Canadian mining investment in Africa is expected to exceed C$14 billion in 2010. The Canadian Roundtable process dealt with the extractive sector as a whole. Energy (all sectors) contributed C$75.2 billion, or 5.9 per cent, of GDP in 2005, of which crude oil and natural gas accounted for C$27.9 billion (Canada, Natural Resources Canada (2006b). The Canadian oil and gas industry is traditionally divided into three categories: upstream (exploration), midstream (processing, storage and transportation) and downstream (refining, marketing, distribution). The upstream sector is the largest single private sector investor in Canada. In 2005, new investment in the Canadian oil and gas industry was valued at C$45.3 billion (Canadian Association of Petroleum Producers, 2006).
Most of Canada's petroleum production is exported. In 2005,1.58 million barrels per day of crude oil, 0.44 million barrels per day of refined petroleum products and 3.8 trillion cubic feet of natural gas were exported, mainly to the US. Seventy‐five Canadian oil and gas exploration and production companies have land holdings in 69 countries and areas of the world (Doig's Digest, 2006). Five of Canada's most prominent petroleum companies operate in over a dozen developing countries, including China, Algeria, Peru and off the coast of North Africa. These are Nexen, Husky, Talisman, PetroCanada, and Canadian Natural Resources.
Extractive‐sector industries directly employ more than 638,000 Canadians and sustain a substantial domestic cluster of mainly small and medium‐sized companies engaged in equipment manufacture and supply, engineering, consulting and geo‐science services (Natural Resources Canada, 2006b). The energy and metallic minerals industry is the second largest component of Canadian direct investment abroad (an estimated C$104.1 billion in direct investment) behind the financial services sector.
| Properties, Plant & Equipment, deferred exploration expenditures at cost less accumulated amortization and write‐downs (C$) | |||||
|---|---|---|---|---|---|
| 2001 | 2002 | 2003 | 2004 | 2005 | |
| Angola | 38,295,525 | 37,064,088 | 33,137,903 | 34,248,707 | 24,470,477 |
| Botswana | 29,974,408 | 230,025,383 | 272,554,525 | 276,740,135 | 222,664,586 |
| Burkina Faso | 17,373,270 | 31,680,669 | 41,329,303 | 81,827,888 | 182,681,749 |
| Cameroun | 0 | 0 | 105,000,000 | 112,000,000 | 118,000,000 |
| R. D. Congo | 320,981,150 | 158,725,215 | 167,401,750 | 178,092,854 | 217,182,760 |
| Côte d’Ivoire | 652,338 | 871,029 | 1,578,366 | 1,241,986 | 5,403,173 |
| Eritrea | 2,542,530 | 9,834,086 | 13,484,227 | 5,046,220 | 8,561,650 |
| Gabon | 2,289,190 | 3,889,290 | 7,331,146 | 11,114,612 | 10,726,513 |
| Ghana | 159,102,508 | 198,544,826 | 436,630,701 | 476,252,920 | 670,688,712 |
| Guinea Bissau | 0 | 0 | 0 | 4,925,264 | 5,371,819 |
| Guinée | 200,243,825 | 197,600,380 | 196,550,297 | 216,357,788 | 315,159,453 |
| Kenya | 12,891,179 | 14,929,104 | 16,987,236 | 19,538,821 | 24,029,715 |
| Liberia | — | — | — | — | — |
| Madagascar | 0 | 0 | 7,889,776 | 38,251,366 | 72,609,537 |
| Malawi | — | — | — | — | — |
| Mali | 249,980,718 | 229,861,181 | 191,663,321 | 217,022,206 | 261,674,819 |
| Morocco | 0 | 0 | 0 | 825,265 | 1,291,582 |
| Mauritania | 0 | 0 | 0 | 70,775,750 | 139,524,950 |
| Mozambique | — | — | — | — | — |
| Namibia | 22,872,075 | 24,587,323 | 24,667,182 | 20,390,232 | 17,513,104 |
| Niger | 52,322,379 | 53,898,060 | 64,081,639 | 78,022,843 | 73,033,096 |
| Nigeria | — | — | — | — | — |
| Uganda | 1,503,286 | 2,092,083 | 2,124,675 | 2,653,770 | 4,638,426 |
| R. Ctr Africaine | 28,755,000 | 28,783,950 | 29,324,700 | 33,408,750 | 41,466,940 |
| Sénégal | 591,000 | 780,100 | 1,110,844 | 2,421,237 | 4,152,724 |
| Sierra Leone | 16,545,000 | 16,547,500 | 22,013,311 | 20,863,876 | 25,789,863 |
| South Africa | 658,337,180 | 862,058,417 | 1,192,004,451 | 1,299,949,676 | 1,379,759,546 |
| Tanzania | 750,411,836 | 1,007,531,865 | 1,518,603,280 | 1,480,331,423 | 1,503,597,243 |
| Tunisia | 43,569,000 | 36,716,000 | 24,715,000 | 16,320,000 | 6,294,000 |
| Zambia | 162,244,032 | 109,648,001 | 131,765,851 | 418,159,216 | 530,828,838 |
| Zimbabwe | 5,892,930 | 4,655,695 | 2,299,943 | 1,262,500 | 1,563,000 |
| Total | 2,777,370,356 | 3,260,324,245 | 4,504,249,428 | 5,118,045,305 | 5,871,147,470 |
| Note: ‘0’ or ‘—’ indicate that no identifiable asset has been reported. It should not be interpreted that there are no Canadian investments in these countries or years. Canadian public companies are defined as companies having physical offices in Canada (head‐office or operating office). Source: Government of Canada, Natural Resources Canada, 2006. |
Establishing the National Roundtable Process of Consultation
In June 2005, the 38th Parliament's Standing Committee on Foreign Affairs and International Trade (SCFAIT) issued its report, ‘Mining in Developing Countries and Corporate Social Responsibility’ which called on the federal government to ‘put in place a process involving relevant industry associations, non‐governmental organisations and experts, which will lead to the strengthening of existing programmes and policies in this area, and, where necessary, to the establishment of new ones’ (Government of Canada, 2005:2).
In response, the government held four National Roundtables on Corporate Social Responsibility (CSR) and the Canadian Extractive Sector in Developing Countries between June and November 2006 in Vancouver, Toronto, Calgary and Montreal. The process was led by an Advisory Group whose report was intended to summarise the input received across all of the Roundtables, as well as incorporate the input from 104 written submissions received on the topic of CSR and the Canadian extractive sector operating abroad. The report was to include a review of the mandate and management of the process, summarise the key messages communicated for all of the major themes, and provide recommendations to the Government of Canada.
The final report was intended to contribute to the government's initiative to review the challenges associated with Canadian extractive‐sector companies operating in developing countries. It was also intended to generate a response to Parliament presenting recommendations for government, civil society, the investment community and the extractive industry on ways to strengthen the CSR performance of the extractive sector in developing countries. Throughout the Roundtable process the term CSR was understood to refer to
the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society (GoC, 2006:5).
This definition was furnished in the CSR National Roundtables Discussion Paper (GoC Industry Canada, 2006) and assisted in framing the discussions at all of the Roundtables. The concrete focus of discussions throughout the Roundtable process was on the environmental, social and human rights performance and impacts of Canadian extractive companies on the communities and states in which they operate. Each Roundtable provided an opportunity to gather input from the public through Open Sessions and to foster an in‐depth, policy‐relevant discussion with invited participants in closed Issue Focus Sessions.
The Roundtable Process of Consultation
Government leadership in organising the National Roundtables was provided by an inter‐departmental Steering Committee, chaired by the Department of Foreign Affairs and International Trade. The Steering Committee included representatives from Natural Resources Canada, Industry Canada, Environment Canada, the Canadian International Development Agency, Indian and Northern Affairs Canada, the Department of Justice, Export Development Canada, and the Privy Council Office.
The Steering Committee worked with an Advisory Group made up of experts drawn from across stakeholder groups. The Advisory Group included representatives from industry associations; individuals currently within or recently retired from extractive‐sector companies active overseas; civil society organisations; labour; academics; and the financial sector. The Roundtable sessions included hearing oral testimony from the public, industry and labour organisations and written submissions from invited experts and face‐to‐face discussions.
Industry Participation
Industry recognition of the need for a consultative process was clearly illustrated by the participation of the directors of the Mining Association of Canada (MAC), Gordon Peeling, and the Prospectors and Developers Association of Canada (PDCA), Tony Andrews, on the Advisory Group. Such consultations were not new to either of the mining associations. The Mining Association of Canada has a history of engagement in multi‐stakeholder processes. They have been broad based such as the Whitehorse Mining Initiative (1992–1994) and more narrowly focused like the Species at Risk Act Working Group that combined both industry and environmental group members. Consequently, when the Government made the commitment to hold a series of roundtables on the issues raised in the Standing Committee on Foreign Affairs and International Trade 2005 Report and asked the MAC to participate in the advisory group, it did so without hesitation. MAC has its own CSR activity called Towards Sustainable Mining (TSM) which has been part of its work since 2001 (and public since 2004). TSM deals with many, but not all, of the performance issues raised in the SCFAIT report and hence the roundtables were viewed as a learning opportunity by MAC. There was also a desire on the part of industry to seek clarity from the Government of Canada as to what its expectations were with respect to the extractive sector's CSR performance.
The roundtable process saw an evolution of the views of some of the participants from industry concerning recognition of the existence of problems and the need for recommendations. While this evolution was sufficient to allow the recommendations to receive unanimous support, views among industry representatives remained mixed as to the magnitude of those problems. Nonetheless, the need for such standards left little doubt as expressed by one industry representative:
The industry participants on the Advisory Group agree on the wisdom of these standards generally applicable by all Canadian mining companies operating in developing countries, because deficient performance abroad by any Canadian mining company reflects badly on and complicates the lives of all Canadian mining companies (Interview, 8 August 2007).
The Overall Recommendations
The Report (GoC, 2007) represents the outcome of a 10 month process of consultation, discussion and negotiation. It was characterised at the outset by the wide variance of views among the 17 members of the Advisory Group concerning what was needed. However, there was a common recognition that the process was an occasion to move forward in an area of vital and growing concern. On the one hand, representatives from civil society wanted to establish a mandatory set of standards through a legislative process. On the other, industry representatives were adamantly opposed to mandatory standards and reaffirmed their belief in voluntary norms, the application of which would rest with industry. The end result was a proposal for a voluntary Canadian CSR Framework that would nonetheless apply to all companies in the extractive sector.
Beyond the set of recommendations put forward by the Advisory Group for adoption by the GoC, the Report included recommendations for the consideration of industry, financial institutions, the investment community, pension funds, and civil society, as means to enhance the CSR performance of Canadian companies in the extractive sector operating internationally.
The Report's central recommendation concerned the development of a Canadian CSR Framework. Advisory Group members urged the GoC, in cooperation with other actors involved, to adopt a set of CSR Standards that Canadian extractive‐sector companies operating abroad would be expected to meet. They would be reinforced through appropriate reporting, compliance and other mechanisms, involving the withdrawal of government support for non compliance. The main components of the Canadian CSR Framework and their key attributes, as recommended in the Report were:
- 1.
The Canadian CSR Standards, for initial application, are to be based on existing international standards that are supported by ongoing multi‐stakeholder and multilateral dialogue;
- 2.
CSR reporting obligations based on the Global Reporting Initiative or its equivalent during an initial phase‐in period, at a level that reflects the size of the operation. The Global Reporting Initiative relies on an international multi‐stakeholder process for its development and continued improvement and applies universally‐applicable reporting principles, guidance and indicators for organisations of all sizes and sectors;
- 3.
An independent Ombudsman office to provide advisory services, fact finding and reporting regarding complaints with respect to the operations in developing countries of Canadian extractive companies;
- 4.
A tripartite Compliance Review Committee to determine the nature and degree of company non‐compliance with the Canadian CSR Standards, based upon findings of the Ombudsman with respect to complaints, and to make recommendations regarding appropriate responses in such cases;
- 5.
The development of policies and guidelines for measuring serious failure by a company to meet the CSR standards, including findings by the Compliance Review Committee. In the event of a serious failure and when steps to bring the company into compliance have also failed, government support for the company would be withdrawn.
- 6.
A multi‐stakeholder Canadian Extractive Sector Advisory Group to advise government on the implementation and further development of the Canadian CSR Framework.
The Report recognised
That in many instances, Canadian extractive companies are operating in countries where governance capacity is weak, where there is corruption and … armed conflict… human rights protection and the enforcement of environmental regulations are often weak or non‐existent. It is therefore recommended that the Government of Canada: work with those developing countries that seek to promote economic and social development through investment in the extractive sectors … to optimise the social and economic benefits of extractive projects; exercise influence in multilateral and regional fora to advance the rights of indigenous peoples with relation to extractive‐sector issues; enhance revenue transparency; build capacity for host country judicial systems; and work with like‐minded countries to strengthen CSR requirements at the World Bank Group and the regional development banks related to lending and support to private sector clients (GoC, 2007, Executive Summary:iv).
The Report also noted that in making these recommendations, ‘the Advisory Group recognizes that the transformation of the ideas and concepts which underlie them into practical, workable measures will require additional work beyond … the roundtable process’. In this the Advisory Group noted ‘that the CSR standards and reporting frameworks recommended for initial application fall short of addressing the full range of issues … regarding extractive industries, particularly with regard to human rights. As a result, an ongoing process has been recommended to ensure that the standards and overall framework are improved over time’ (GoC, 2007:iv).
The Report recommended a series of concrete proposals for immediate attention. The Canadian standards were to have as their initial framework the International Finance Corporation (IFC) Performance Standards and the Voluntary Principles on Security and Human Rights. They were also to use IFC Guidance Notes and the IFC Environmental, Health and Safety (EHS) Guidelines. Guidance notes developed for the Canadian CSR Standards were intended to clarify and augment the interpretation and application of these standards in particular areas.2
The application and interpretation of these standards were intended to ensure the observance and respect for principles of the Universal Declaration of Human Rights and other related instruments3 that are within the sphere of the control of companies. Specific guidelines related to the application and interpretation of human rights principles were to be developed. It was recommended that the GoC, over the medium (three‐five years) and longer term (five‐ten years), support and participate in multi‐stakeholder efforts to provide leadership in the development of an enhanced international CSR framework that incorporates best practices developed through the Canadian CSR Framework.
It was also proposed that the GoC endorse the use of the Global Reporting Initiative (GRI) as the reporting component of the Canadian CSR Framework and expect that all Canadian extractive companies report using GRI, or its equivalent during an initial phase‐in period, at a level that reflects the size of the operation. With a goal of realising sector‐wide GRI coverage, it was recommended that the GoC include GRI or GRI‐equivalent reporting as a fundamental component of the Canadian CSR Framework. That would then be considered as one factor in the determination of compliance with the Framework. Also recommended was the establishment of a scheme within the Income Tax Act that would provide refundable tax credits for CSR reporting using GRI Guidelines or their equivalent. Additionally that there be collaboration with securities regulators and exchanges on adopting GRI reporting for the overseas operations of Canadian extractive‐sector companies as a requirement for listing and that financial institutions, investors, insurers, and other market actors promote GRI reporting by extractive‐sector companies and use such reports in assessing investment risk.
It was also recommended that the Canadian International Development Agency (CIDA) make known the standards regarding social, environmental, human rights and development impacts used by the Canada Investment Fund for Africa (CIFA). That knowledge would be used to help screen investments and measures to ensure adherence to the proposed standards. CIDA should monitor and report annually to Parliament on CIFA's activities and how they conformed to the objectives of the fund, and on development impacts achieved through CIFA. The report further recommended that Export Development Canada (EDC) improve its disclosure policy. Subject to bona fide commercial confidentiality concerns, EDC should publicly release information in a list of specified areas.
With regard to the compliance component of the Canadian CSR Framework, it was recommended that the GoC fund the establishment of an independent Ombudsman office, mandated to provide advisory, fact‐finding and reporting functions. Further, the Government of Canada was recommended to establish a standing tripartite Compliance Review Committee that would determine the nature and degree of any company non‐compliance with the Canadian CSR Standards and make recommendations with regard to what further action should be taken.
In cases of serious non‐compliance where the Compliance Review Committee determined that remedial steps have not been or are unlikely to be successful, the Compliance Review Committee would make recommendations with regard to the withdrawal of financial and/or non‐financial services by the Government of Canada. The compliance mechanism would apply to all Canadian companies, that is, those incorporated in Canada and those that have their head office in Canada.
With regard to conditioning of government support, it was recognized that the government may provide Canadian extractive‐sector companies with support in their foreign operations, including trade missions, that goes beyond ordinary consular services (meaning those consular services that are routinely provided to Canadian citizens). However, when such support seeks to promote a Canadian company or its interests in a foreign country, it was recommended that the GoC condition this support on compliance with the Canadian CSR Standards. Finally, it was recommended that determination by the GoC of a serious failure by a company to meet the Canadian CSR Standards should lead to the withdrawal of this additional support.
Based on existing international standards and obligations, the Report's recommendations proposing the creation of a set of Canadian CRS Standards were both concrete and immediately operational. Their implementation would allow the government to begin to better monitor and respond to human rights and environmental concerns raised by the activities of Canadian companies operating abroad. Moreover, the process set in motion by the Report was presented as one which would be ongoing.
Canada's Accountability & Responsibility in the Mining Sector
More than a year after the submission of the unanimous Report to the Government of Canada, there has still not been an official response (Embassy, 2008). Further to its publication, there were clear indications that certain sectors of industry and notably the Canadian Chamber of Commerce were attempting to ensure that the government backtrack and not adopt the Report. Yet there were also strong messages from national and international leaders urging the Harper Government to seize the opportunity offered by the Report to contribute to moving practices forward in this area. One such statement came from John G. Ruggie, the Special Representative of the United Nations Secretary‐General, Secretary on Business and Human Rights. He had been invited to appear as an expert witness before the roundtable process. In a letter to the Prime Minister of Canada dated 16 January 2008, Mr. Ruggie quoted the latter's declaration at the Heiligendamm G8 Summit in June 2007 and noted:
the implementation of the recommendations from this process will place Canada among the most active G8 countries in advancing international guidelines and principles on corporate social responsibility (CSR) in this (the extractive) sector.
We can now summarise what was innovative in the Report and what issues remain untouched. While the origins of the norms on which the proposed Canadian CSR Standards are to be based ‐ if the Report is accepted ‐ remain the multilateral arena, it is innovative that there was the decision to establish a national CSR framework ‐the first of its kind to our knowledge. This represents an attempt to set out clear responsibilities not only for the private sector but for the GoC. In this sense, there is an explicit recognition that regulatory capacity cannot be treated simply as a technical or administrative issue to be resolved by the introduction of the right set of procedures, implemented and monitored by corporate actors and put forward as universally valid for companies operating in a wide range of countries. The proposed recommendations broaden what have been identified in the first part of this article as technocratic legitimation processes to include political responsibility. There appears to be clear recognition from within industry that the role of the GoC needs to be clarified ‐ one of the objectives sought by industry representatives through the consultation process. As one representative put it:
The primary role of the Government of Canada should be to work with other governments to increase their capacity to manage resource development in a manner consistent with ‘sustainable development’. It was also important for industry to have a clear understanding of what the Government of Canada's expectations were/are with respect to industry performance regarding human rights, sustainable development etc. There was neither clarity in the case of the latter nor sufficient effort in the past to working with the business community on development in developing countries where resources would be a significant part of the development opportunity … The way forward is to enhance the achievement of development objectives by encouraging partnerships between governments, industry and civil society organizations (Interview with Gordon Peeling, 16 August 2007, emphasis added)
This observation made by the President of the Mining Association of Canada and Member of the Advisory Group of the National Roundtables seems to confirm Szablowski's analysis concerning the tendency for governments to attempt to transfer what were previously considered public responsibilities to reluctant actors in the private sector. It points as well to the lack of clarity in this process, with the result of an effective blurring of the division of responsibilities between the public and the private actors.
The roundtable process seems to have sidestepped the question of the effective participation of affected communities in consultations. This is an area which appears to be conditioned by current certification regimes which emanate increasingly from the multilateral arena. The reasons for this have clearly to do with the sensitive and unresolved status of discussions domestically, notably with regard to the demands of First Nations affected by mining activities in Canada. Here, the archaic nature of mining legislation in several Canadian provinces and lack of political will, continue to restrict meaningful forms of consultation and accommodation of Aboriginal rights and title before the granting of mineral leases. Consequently, although the recommendations did not address the complex issue of the forms of consultation required with local communities before extractive activities are allowed to go forward (explicitly rejecting the civil society initiative to the Advisory Group of the recommendation in favour of free, prior and informed consent), the proposal to establish an independent Ombudsman tried to provide well‐defined channels of participation for fact‐finding in order to assess the material basis related to complaints. The recommendations also identified the locus of the political responsibility for this process as resting with an independent Ombudsman who would be responsible for the publication of the results of the fact‐finding process and public reporting on an annual basis.
There are other important areas that the Report did not address. In the presence of the weak institutional capacity of many of the host governments of the countries where Canadian companies operate, and in the context of the emergence of a body of norms and standards that have their origin in the multilateral arena, current initiatives have tended to legitimise the activities of private operators, while imposing relatively limited regulatory responsibilities on governments. The absence of close attention to the issue of the weakened institutional and political capacity and consequently, of the regulatory capacity of host governments is particularly salient. As legitimacy and regulation are interdependent products of legal processes, such an omission can only detract from establishment of regulatory terms which are deemed legitimate.
In the context of the weakened institutional and political capacities of many of the mineral rich countries of Africa, the tendency on the part of multilateral financial institutions and Western nations, including Canada, has been to suggest that such issues, which are in fact deeply rooted historically, can be treated as ‘weak governance’ and resolved by the introduction of the right set of good administrative and procedural measures. Such a perspective appears strikingly insufficient. On the one hand, as noted, the increasing technicisation of decision‐making processes runs the risk of sidelining dissenting views and depoliticizing the issue of resource distribution. On the other, in the context of the overriding emphasis on technical and administrative aspects of ‘governance’, proposals, notably by Canadian government officials, to ‘capacity building for resource governance’ in developing countries, miss the key point. This is that past reform measures which sought to open up the extractive sectors for investment did so in a manner that has severely weakened the political and institutional capacity of local governments. Consequently, it becomes a circular argument to call for the reinforcing of local capacity if the nature of past and ongoing reforms which weaken local capacity is not questioned.
The absence of attention to the critical question of the crisis of the state of many mineral rich countries, to the forms of liberalisation which may be a contributing factor to weakening institutional capacity, or to the conditions for reinforcing state legitimacy as a precondition to ensuring future social and political stability (Campbell, 2006b) appears paradoxical. This is not the least because of the importance accorded by industry representatives to issues of security and risk minimization in the countries in which growing mining investment is anticipated.
In this regard, the roundtable process did not address in its main recommendations, the need for much closer attention to be paid to the coherence of Canadian investment, trade and aid policies and the issue as to whether these policies contribute to the social and economic development of the countries in which Canadian extractive companies operate. Nor did the recommendations address the policies and positions advanced by Canada in international institutions (World Bank Group, UN agencies, etc.) with a view to ensuring that the policies of these organisations contribute to the social and economic development of the countries where Canadian mining companies are present. Both of these areas were however, mentioned as ‘requiring further attention by the Government of Canada and upon which the Canadian Extractive Sector Advisory Group could provide advice’ (GoC, 2007:60).
Finally, to the extent that the initiative for the reform process of mining codes or the regulatory frameworks of the mining sector more generally in mineral rich countries of Africa, remain externally driven, the issue of the appropriation of these initiatives, as well as the reinforcement, rather that the erosion of state legitimacy, remain unresolved. Also unresolved is the issue of social and political responsibility for these processes.
Looking Forward
Mounting pressure from negative social and environmental impacts and allegations of violations of human rights involving Canadian mining companies at the origin of the roundtables brought the problem of the legitimacy of mining activities to a head. As Szablowki documents, multilateral initiatives have responded through the elaboration of a transnational legal framework. The current situation in which many African countries find themselves however, suggests several shortcomings. These are especially noticeable with regard to poor local capacity to monitor, implement and enforce new norms and regulations, and should this become necessary, to implement remedial measures. The permissiveness of situations resulting from what at times takes the form of an ‘enforcement vacuum’ has led to a trend towards the employment of private security forces and ‘the privatisation of risk’ which may well further reduce legitimacy of the governments concerned. There is therefore a need for better forms of ‘certification’ that will ensure and reinforce the legitimacy not only of the operations of Canadian companies in the extractive sector but of the governments of the countries in which they operate.
To the extent that the recommendations of the Roundtable Report set out measures to ensure better accountability, this set of proposals goes beyond past initiatives emanating from the multilateral arena. It is significant in the way it has contributed to clarifying the social and political responsibility of the various actors concerned.
But the GoC remains reticent in recognising that security for Canadian mining operations is best assured by processes underpinning legitimacy of regulatory measures. It would be short‐sighted for the GoC not to advance the debate concerning accountability and responsibility in the mining sector. For the issue of reinforcing the legitimacy of the regulatory processes which govern mining activities, if these are to be sustainable, needs to be reset within the broader framework of ensuring resources are developed to contribute to the improvement of the livelihoods of the populations in the communities and countries concerned. The security of mining companies and their activities will never be assured if mining communities and countries where they operate is not also assured and the promise of social and economic development respected. These issues are inextricably linked.