The Legal Structure Behind CSR:
Is this still a “voluntary” concept?
Kevin O’Callaghan
Risk Mitigation & Corporate Social Responsibility (CSR)
April 28, 2011
Introduction
• International Mining today
• Complex and demanding environment for political risk
• Increasing demands - social license and corporate responsibility
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Investment Communities
Local Communities
International NGOs
Governments
• Variety of factors:
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increasing demands for resources
increased attention to environmental threats
gap between the poor and rich
human rights concerns
Multiplying international fora for bringing disputes
Involvement of civil society, NGOs
Introduction
• In response, evolving patchwork of CSR related treaties,
legislation, voluntary norm, best practices.
• Patchwork is complex and inter-related
• Best practices → voluntary norms → international conventions
• Although CSR started as a voluntary concept, the
interrelatedness of the patchwork has changed the
complexion such that some aspects of CSR are becoming
mandatory
• Understanding of the structure of this patchwork is essential
for navigating the new CSR environment
Legal Structure
1. Treaties & Conventions
2. Legislation & Regulations
3. Finance Related Obligations
4. International Guides
5. Voluntary Standards
6. Industry Norms and Best Practice
Treaties & Conventions
• Treaties and Conventions are among States and not
generally directly applicable to corporations
• Only a few treaties relating to CSR issues directly
• Of those that are relevant, but tangential, most are:
• rights based
• aspirational rather than binding
Treaties & Conventions
International Labour Organization – ILO 169
• Indigenous and Tribal Peoples Convention, 1989
• Canada, US and UK not signatories
UN Declaration on the Rights of Indigenous Peoples (2007)
• Non-binding aspirational declaration
• Can, US, Australia – late adopters of the declaration (with
explanations of interpretation)
• Incorporates Free Prior Informed Consent (FPIC)
• Controversially using “consult to obtain FPIC”:
• Before legislative and administrative measures
• Before exploiting mineral, water or other resources
Treaties & Conventions
Organization for Economic Co-operation and
Development (OECD) - Guidelines for Multinational
Enterprises (1976)
• Non-binding recommendations providing voluntary
principles and standards for responsible business conduct
for multinational corporations operating in or from OECD
countries
• Covers: employment and industrial relations, human rights,
environment, information disclosure, combating bribery,
consumer interests, science and technology, competition,
and taxation.
OECD - International Convention on Combating Bribery
of Foreign Officials (1997)
• Antecedent to many domestic anti-bribery acts
Legislation & Regulations
• Although a relatively recent development, some States have
begun legislating in respect of CSR principles
• If CSR continues to be seen as an unregulated issue, States
will be tempted to fill the void with extra-territorial legislation
• Here in Canada, Bill C-300, was defeated last year –
but made it to 3rd Reading – is evidence of this tendency
• Additionally, there are often domestic laws in subsets of CSR:
anti-corruption, environment, social equality and human rights
Legislation & Regulations
• Legislation that applies extra-territorially:
• Corruption of Foreign Public Officials Act (Canada)
• Payments to a foreign officials for the purpose of obtaining business
• Needs to be a "real and substantial" link to Canada - a portion of the
illegal activities will have to have been committed in Canada
• Bribery Act (UK)
• In addition to a number of other bribery related offences, it prohibits
offering a financial or other advantage to a foreign public official
• Foreign Corrupt Practices Act (US)
• Payments to a foreign officials for the purpose of obtaining business
• Applies to any US Company or issuers of securities in the US
• Alien Tort Claims Act (US)
• Allows US courts to hear human rights cases brought by foreign
citizens for conduct committed outside the US
Legislation & Regulations
• Must also consider local laws in relation to CSR, for example
South Africa:
• Mine Health and Safety Act
• National Waters Act
• Atmospheric Pollution Act
• Environmental Conservation Act
• National Environmental Management Act
• Environmental Assessment
• Black Economic Empowerment Act
• Social equality
• Mining Charter between gov and industry
• Mineral and Petroleum Resources Development Act
• Title to minerals, environmental, social equality
Finance Related Obligations
• Large amounts of capital needed for mining projects
• Access challenging in the aftermath of the credit crunch
• Need worldwide access to lenders – export credit
agencies, commercial banks and insurance companies
• Reputable international and national financial institutions
require compliance with international standards or
guidelines:
• environmental impacts
• social performance
• Mitigate risk through demanding evidence of “social
license” to operate
Finance Related Obligations
International Finance Corporation (IFC) – Performance
Standards on Social and Environmental Sustainability
• The result of workshops around the world - published in 2006
• Have become the benchmark for developing and financing
responsible extractive projects in emerging markets
• Applied by most major public and private financial institutions
• The Standard include strong social considerations:
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resettlement practices
management of labour rights
working conditions
impacts on indigenous culture
community health
safety and security issues
• Revised through 2010 - to be approved in 2011
• strengthening of Free Prior Informed Consent language
Finance Related Obligations
World Bank –
Environmental, Health, and Safety (EHS) Guidelines
• The EHS Guidelines are technical reference documents
with general and industry-specific examples of Good
International Industry Practice
• Referred to in IFC's Performance Standard 3 on Pollution
Prevention and Abatement
• There is a guideline specifically for Mining and Milling
Finance Related Obligations
Equator Principles (2003)
• 10 Principles:
• “Voluntary” set of standards for determining, assessing and
managing social and environmental risk in project financing
• The members agree to only provide funding if the project
conforms to the first 9 principles (including an audit)
• The 10th principle is that the members themselves agree to
report on their performance regarding this commitment
• Developed by financial institutions in consultation with the
IFC and parallels those Standards, referencing them in a
number of the Principles
• 80% of the project finance market, including most
Canadian banks adhere
Finance Related Obligations
Export Development Canada (EDC)
• EDC’s CSR screening mechanisms, pre-signing due
diligence and ongoing project monitoring help ensure that
Canadian companies conduct their international operations
to universally acceptable standards.
• Apply the Equator Principles
• In addition to other standards: OECD Common
Approaches to the Environment and Officially Supported
Export Credits.
Voluntary Standards
• A number of different non-governmental organizations offer
standards that are used as a benchmark for evaluating an
enterprises policies and procedures
• Some are management style standards that can be evaluated
against and audited
• Others are more guidance documents, without clear metrics
• Companies that subscribe to these programs, link their corporate
reputation to the achieving these standards
Voluntary Standards
ISO 26000 – International Organization for Standardization
• Standard providing guidelines for social responsibility released on
1st November 2010
• Offers guidance on socially responsible behavior and possible
actions
• it does not contain requirements and, therefore, in contrast to ISO
management system standards, is not certifiable
SA8000 - Social Accountability International (1997)
• A global standard-setting non-governmental human rights
organization dedicated to improving workplaces and communities
• A management system standard certifiable through affiliate Social
Accountability Accreditation Service (SAAS)
• By 2010 had over 1,365,236 workers in 62 countries in operations
certified to SA8000
• Programs in Europe, India, China, Vietnam,
Central America, Turkey, and others
International Guides/Initiatives
• There have been a number of attempts through the United
Nations to try and create momentum around developing core
principles of CSR that companies would be willing to sign
onto
• Additionally, the UN appointment of John Ruggie as a
Special Representative to try to find a way to express a
general framework for analysing the interaction between the
protection of human rights and the legitimate pursuit of
business
• Such attempts had failed in the past, but there have been
successes
International Guides/Initiatives
UN Global Compact
• The Global Compact is a principle-based framework for
businesses, stating ten principles in the areas of human
rights, labour, the environment and anti-corruption
• Launched with nine Principles in 2000, a 10th dealing with
corruption was added in 2004
• Grown to more than 8,000 participants, including over
5300 businesses in 130 countries around the world
• Encourage businesses worldwide to adopt sustainable
and socially responsible policies, and to report on their
implementation
• Voluntary, although a lack of reporting on progress will
result in a change of “status” and may result in expulsion
International Guides/Initiatives
Ruggie’s “Guiding Principles for the Implementation of the
'Protect, Respect, Remedy' Framework”
• UN Special Representative Ruggie originally produced the
Framework in 2008:
1. State: protect against human rights abuses by third parties
2. Business: respect human rights
3. People: access to effective remedy (judicial and other)
• 2011 Ruggie released final “Guiding Principles” that include a
number of practical strategies for business to manage legal and
related risks associated with meeting human rights obligations:
• preparing a company policy commitment to respecting human rights
• carrying out human rights due diligence
• implementing operational-level grievance mechanisms to address
potential breaches
• Likely to inform the domestic legal and policy standards
applicable in countries across the globe
International Guides/Initiatives
Principles of Responsible Investment (PRI)
• A 2006 initiative and a set of aspirational and voluntary
guidelines for investors
• Linked to the UN Global Compact
• Addresses environmental, social, and corporate
governance (ESG) issues
• Over 850 companies have signed up to the principles
• Obligation to report on implementation of the Principles - in
2009 five signatories were delisted for not fulfilling this
obligation
International Guides/Initiatives
Voluntary Principles on Security and Human Rights
• Set of non-binding principles developed in 2000 to address
the issue of balancing safety needs while respecting
human rights
• Filled a void for companies seeking guidance about
managing risks related to their security and human rights
practices
• Especially in countries that are often associated with
conflict or alleged abuses
• Provide guidance for companies on identifying human
rights and security risk, as well as engaging and working
with state and private security forces
Industry Norms and Best Practice
• Mining has been at the forefront of CSR controversies from
the outset of the concepts
• The mining industry has been one of the most proactive in
creating industry norms and best practices in response to
the perceived CSR problems attributed to the extractive
industries
Industry Norms and Best Practice
Prospectors & Developers Association of Canada - E3 Plus
• Reference materials to help exploration companies to:
• continuously improve their social, environmental and health and safety
performance
• comprehensively integrate these three aspects in to all their exploration
programs
• Provides 8 clear principles and then guidance with reference to OECD,
Equator Principles and many other guidance documents
Mining Association of Canada (MAC) – Towards Sustainable Mining
• Improve the industry’s performance by:
• Finding common ground with communities of interest
• Helping mining companies evaluate the quality, comprehensiveness and
robustness of their management systems
• Providing four performance elements, with appropriate indicators, scoring and
external verification systems
• Participation is a condition of membership in MAC
Industry Norms and Best Practice
International Council on Mining and Metals (ICMM)
– Sustainable Development Framework (2003)
• All members have committed to the Framework which has three
elements:
• a set of 10 Principles (including a set of supporting position
statements)
• public reporting
• independent assurance (third party auditing of members
regarding the Principles)
• The Principles reference elements other principles and guidelines:
OECD, IFC, the Global Compact, and others
• In furtherance of this Framework, ICMM created:
• Position Statement on Mining and Indigenous People
• Good Practice Guide: Indigenous Peoples and Mining
Conclusions
• “Voluntary” CSR guidelines have become akin to mandatory CSR
regulations through a variety of mechanisms:
• Contractual: as a prerequisite to Financing
• Choice: by publicly committing to follow guidelines/principles
• Peer Pressure: by the threat of expulsion from membership
• Corporate Reputation plays a large role in creating a “mandatory”
feel to CSR, but the contractual provisions relating to financing could
have more direct legal consequences
• Additionally, there is a clear push by some in the NGO community to
make the guidelines/principles more formally mandatory (see Bill C300) – this tendency is likely to increase
Kevin O’Callaghan
(604) 631-4839
kocallaghan@fasken.com