It may feel good to do the right thing, but in the realm of international trade, corporate social responsibility has emerged as a vital modus operandi on which failure and success often hinge.
It wasn’t always that way. EDC chief CSR advisor Signi Schneider says as recently as a decade ago the prevailing Canadian approach to international trade was founded largely on a belief that “Western business practices and technical expertise would ‘seal the deal’; now those companies face foreign competitors with similar skill sets and capabilities.”
She says this – among other factors – has emphasized CSR’s importance in trade.
For Ms. Schneider, this shift was highlighted recently when a foreign delegation of state-owned enterprises visited EDC with a specific interest in learning more about Canadian ethics and anti-corruption practices.
“They had clearly been thinking ahead on this. They have very high expectations regarding ethics and governance, and they posed tough questions about how state-owned entities deal with these issues.”
Rob Moore, a former senior vice president responsible for investor relations, corporate marketing and public affairs with companies including HBC and Loblaws, says the importance of CSR is evolving at an exponential pace in part because of technologies that enable the monitoring and reporting of corporate practices abroad.
“If you think you are operating out-of-site/out-of-mind when you are in another country, that’s just not the case. There is an active international NGO community using social networks dedicated to reporting on corporate operations. They use technologies like Google Earth to monitor mines and other job sites.”
Mr. Moore, now serving as acting president of Canadian Business for Social Responsibility, a non-profit, member-led organization, says, as a result, it’s incumbent on businesses to do more than just meet regulatory requirements.
“Six or seven years ago, you would find most organizations following rules of the law only. You would be hard pressed to find large, successful organizations practising that way today, with a 100 per cent reliance on being law abiding as the sole guide to their operations. Operating ethically and transparently is essential to earning a social licence to trade, extract, procure or sell.”
That may be true, but Ms. Schneider notes that emerging markets are complex places to do business and having “a CSR policy is not a guarantee that issues won’t arise. But a CSR policy provides your company with principles and measures to mitigate risk and respond to challenges.”
She points to the rising emphasis of CSR in the extractive industries, for example, and applauds the leadership shown by Canadian companies including Inmet Mining, Talisman Energy and Iamgold.
“These companies take a holistic approach to risk and opportunities. They make CSR part of their business strategies,” she says. “In the mining sector, companies that are acquiring mineral assets don’t want projects that have put the community offside, where there is a high risk that the project may face roadblocks. They also know their financiers require them to get it right early on.”
Mr. Moore adds, “If you want to dig something out of the ground and you don’t engage the community on issues such as water, employment, social dynamics and more, you risk creating a barrier to your operation’s ultimate success.”
He says the key is a process that involves broad stakeholder engagement to clearly identify expectations on all sides, sets out commitments and reports on them transparently.
So why aren’t all Canadian companies pursuing CSR? Ms. Schneider says sometimes a shortsighted CFO may overlook the value in CSR. In other instances, all that is lacking is a formal structure around existing practices.
“What I often say to clients just starting out is ‘You know the principles; write them down,’” she says. “An absence of a CSR policy doesn’t mean an absence of good work. But when you write it down, those values are translated into official practices and everyone in the organizations gets it. That’s how you get everyone engaged, and that’s how you get better at it.”
Mr. Moore believes most Canadian corporations come to the practice as a result of a specific new requirement that they have to come to grips with. “At HBC, we found ourselves in a discussion about labour practices in our supply chain in other parts of the world. That quickly evolved into an expectation of formalized transparency and disclosure.”
Ms. Schneider says it’s important for companies to scale their CSR policies and programs to their company’s size. For example, a small exporter from Alberta interested in selling his goods in Mexico may be worried about being asked for bribes.
“One small bribe may not seem like a big deal to your employee at the time, but you open the door to a form of corporate extortion for the lifecycle of your relationship with that buyer,” she says. “Conversely, companies tell us that after a short period of time after adopting a zero tolerance approach to bribery, the requests for bribes stop altogether.”
Mr. Moore agrees. “Cutting corners will come back to haunt you, especially as you seek to expand or go into other markets or attract investments. And if you think CSR is about being seen as not doing bad things, or just doing the bare minimum, you’re off track too. It’s about understanding and engaging with the community in which you are operating, as well as creating a lasting positive impact, in order to gain a social licence to operate.”
When working internationally he adds, you can’t lose sight of the fact that your actions have an impact beyond your business. “It is essential to operate in adherence with international standards, as your company reflects on all Canadian business. For Canadian business to be successful in the 21st century, we need a strong Canadian brand.”
A Framework for Shaping Business and Human Rights Policies
Global efforts are underway to examine how human rights and business intersect, and to build a consensus on how best to assess and manage the human rights impacts of business.
In “A Framework for Shaping Business and Human Rights Policies” – a free publication available from EDC – author Kathryn Young examines considerations for exporting or investing in another country and essential due diligence Canadian companies are advised to pursue on a variety of financial, legal and host country issues.
To download the PDF, visit edc.ca/framework.
Make CSR part of your strategy
EDC chief CSR advisor Signi Schneider offers the following guidance for companies considering putting corporate social responsibility practices to work:
1. How your company is perceived can be a deciding factor for new hires and will influence those young leaders who you are trying to cultivate. Start a conversation with this group and other future thought-leaders. Without over-promising, start the dialogue. This important demographic is already talking about it; you should be in on the conversation.
2. Read up on companies where the corporate social responsibility group creates business opportunities. Sometimes just challenging staff to move from a compliance mindset to an opportunity mindset can make you see how doing the right thing can also be a competitive advantage.
3. Use consultants. While so much of CSR is common sense put into practice, financial institutions are looking for external validation that your policy or initiative is sound. As you continue to grow, being able to point to an external body that can confirm your policies or programs are robust will keep you from being seen as an organization that – when faced with criticism – can only say ‘Just trust us.’
4. If nothing else, exporters should consider writing an anti-corruption corporate policy that lays out expectations of employee conduct and puts in place a system where employees, if asked for a bribe, can call someone in the organization to receive advice on how to respond. Under Canadian law, the consequences of offering a bribe are very serious. Leaving your employees with no place to go for advice when a potential buyer asks them for a bribe in order to secure the contract puts your staff in a difficult position. Look to Trace International for guidance on how to start.
CASE STUDY: Batero Gold
Efforts to explore a better way strike gold
When Vancouver-based mineral explorer Batero Gold acquired a Colombian property in 2010, it had reasons to believe the land held strong potential for a mine-worthy gold-copper deposit. So did its institutional investors, including Sprott Asset Management, Sentry Select, RBC Global and Canaccord Capital, among others.
Instead of simply advancing an aggressive drill program to prove the resource, however, the company chose to explore a better way. As a result, not only has Batero been gathering data for its official resource estimate, the company has also laid social and environmental groundwork designed to support a promising future for itself and other stakeholders.
“Major producers see corporate social responsibility as progressively important, and view a company’s social licence to operate as being just as crucial as a mining permit,” says Batero president and CEO Brandon Rook. “We decided to build CSR into our exploration activities from the ground up. We believe CSR makes as much social and environmental sense as it does business sense.”
To help it formalize its CSR policies and practices, Batero engaged Green Spirit Strategies, a consultancy led by Greenpeace founder Patrick Moore. Batero’s work began with extensive consultations, surveys and baseline studies to help Batero better understand the local people and environment. “We wanted some real indications on how to make this project a success, not only for our shareholders, but also for the community,” said Mr. Rook.
That process ultimately enabled Batero to undertake initiatives ranging from social- and cultural-support programs to an innovative “Farms for the Future” program that offers farmers whose land was within Batero’s licence area an opportunity to trade it for more productive farmland a short distance away. The program also provided farmers with new homes and coffee processing equipment, a boon to their lives and ability to improve their standard of living.
The company’s environmental efforts include the deployment of water treatment systems that benefit the exploration operations and now bring much-needed potable water to the area.
Along the way, Batero also struck gold in the ground – lots of it.
“We feel this isn’t just the right thing to do. By working this way, we are maximizing the value of the asset for our shareholders, the local community and for a mining operator that may eventually choose to develop this resource,” said Mr. Rook.
For more information, visit www.explorebatero.com.