The Canadian government’s new CSR strategy

The following is the introduction to Building the Canadian Advantage: A Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector, produced by Foreign Affairs and International Trade Canada and released on March 26, 2009.

As Prime Minister Stephen Harper noted in Tanzania in November 2007, the government encourages and expects Canadian companies to meet high standards of corporate social responsibility. The prime minister acknowledged that Canadian investment in the extractive sector abroad can result in a win-win outcome both for the economy of Canada and those of resource-rich developing countries, but that the extractive sector faces unique challenges operating in complex situations abroad.

Extractive industries (mining and oil and gas) make a major contribution to Canadian prosperity. Building on this domestic strength, Canada has also become a major player in the international extractive sector. At about $79.3 billion in 2007, mining and energy investment is the third-largest component of Canadian direct investment abroad (stocks), generating significant additional exports from Canada.

Canada is a particularly strong player in the global mining sector. Canadian financial markets in Toronto and Vancouver are the world’s largest source of equity capital for mining companies undertaking exploration and development. Mining and exploration companies based in Canada account for 43% of global exploration spending. In 2008, over 75% of the world’s exploration and mining companies were headquartered in Canada. These 1,293 companies had an interest in some 7,809 properties in Canada and more than 100 other countries.

Extractive companies are increasingly searching for new resources in developing countries. Canadian mining companies have invested over $60 billion in developing countries, including about $41 billion in Latin America (including Mexico) and almost $15 billion in Africa. The economic downturn that began in 2008 will likely decrease Canadian mining investments in Africa, as well as in other regions in the world. The fact remains, however, that Canadian companies play a major role in the extractive sector worldwide.

The sector faces unique social and environmental challenges when operating in developing countries. Faced with these challenges, a number of Canadian companies are engaging in corporate social responsibility (CSR) initiatives, generally defined as the voluntary activities undertaken by a company to operate in an economically, socially and environmentally sustainable manner. These companies are making substantial contributions to economic development in their host countries.

Indeed, Canadian industry associations and extractive companies have been recognized domestically and internationally for their leadership on these issues. However, more can be done. Many companies are looking to the Canadian government for guidance and support in managing the risks of operating in complex and challenging environments.

The Canadian government has already taken significant steps to promote and support corporate social responsibility by Canadian companies operating abroad. Consistent with the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises, Canada has established a National Contact Point within the Department of Foreign Affairs and International Trade (DFAIT).

In addition, DFAIT has undertaken initiatives to enhance the capacity of its officers through training sessions and an online training tool. DFAIT has created a $170,000 CSR Fund to assist Canadian offices abroad and in Canada to engage in CSR-related activities.

Communications and marketing materials have been developed to promote CSR within the government and to Canadian stakeholders. DFAIT is also increasing its ability to engage in policy development through a series of research-analysis projects aimed at understanding the CSR context internationally.

In Latin America, the Canadian International Development Agency (CIDA) and Natural Resources Canada (NRCan) have provided assistance to resource-rich countries to improve their governance capacity in the extractive sector.

In addition, Canada has held discussions with free-trade agreement (FTA) partners, including Colombia and Peru, on how best to address CSR in the context of negotiations. Recently signed FTAs with these two countries include CSR provisions that are directed at the parties, encouraging them to promote voluntary principles of responsible business conduct with their business communities.

Canada is also active in promoting CSR-related principles in the financial arena. The government has frameworks and guidelines in place for the sound management of public funds, which are reviewed regularly. The Canada Investment Fund for Africa publicly discloses its principles related to business integrity, and social, environmental, and health and safety objectives.

Canada also supports the consistent implementation of the World Bank Group International Finance Corp. (IFC) Performance Standards. Canada is a state party to the UN Convention against Corruption.

In February 2007, Canada endorsed the Extractive Industries Transparency Initiative, which seeks to ensure revenue transparency in the extractive sector.

In October 2007, Export Development Canada became a signatory to the Equator Principles, an international financial industry benchmark consistent with the IFC Performance Standards.

However, the government can do more. Building the Canadian Advantage: A CSR Strategy for the International Extractive Sector is a comprehensive strategy on corporate social responsibility for the Canadian extractive sector operating abroad.

It was informed by a series of consultations with industry, civil society and other stakeholders held in 2006 (the National Roundtables) and additional input from leading Canadian companies and industry associations. It has taken into account recommendations raised in the June 2005 Standing Committee on Foreign Affairs and International Trade (SCFAIT) report, Mining in Developing Countries — Corporate Social Responsibility.

Building the Canadian Advantage will improve the competitive advantage of Canadian international extractive sector companies by enhancing their ability to manage social and environmental risks. It recognizes that, while most Canadian companies are committed to the highest ethical, environmental and social standards, those that lack this commitment can cause harm to communities abroad and undermine the competitive position of other Canadian companies.

The full 10-page document is available atwww.international.gc.ca