The triple bottom line

Why corporate social responsibility will become everyone’s responsibility

By George Davies
Chair, Board of Directors – North-South Institute
Senior Consultant – Hatch Energy

There is a growing trend toward reporting corporate financial, environmental and social performance – the triple bottom line, which shows how well an organization meets its corporate social responsibilities, and its responsibilities to its investors.

Companies listed on securities exchanges in the United Kingdom, France and South Africa are required to file corporate social responsibility (CSR) reports. Pension funds in Germany, UK and Australia must disclose the extent to which environmental, social and governance performance is taken into account in their investments. Risk evaluations are beginning to address potential exposure to liabilities arising from poor environmental and social performance, while rating agencies are beginning to probe possible environmental liabilities as standards change. We are beginning to see a monetization of greenhouse gas emissions which, for a few companies, may involve gain; but for many, will involve significant additional costs of doing business. Adherence to international CSR standards is often cited as a defense against the increasing numbers of lawsuits being brought against companies by interest groups alleging poor environmental or social practices.

Some companies have become proactive; they pride themselves on being model corporate citizens in corporate social responsibility, pushing the envelope on best practices, which they regard as a means of distinguishing themselves from their competitors, and as a means of earning trust and respect from the communities with whom they interact. In turn they feel this will give them access to development opportunities that may involve sensitivities to community interests. They also believe that good corporate social performance will attract investors who are interested in long-term performance rather than only short-term profits. Companies that have been proactive on CSR have already prepared themselves for new environmental or social performance standards and should gain rather than being penalized as these standards progress.

What is CSR?

There is no one definition. Good CSR can be embodied in the notion of good corporate citizenship, or it can be codified in the eight International Finance Corporation (IFC) standards covering issues from working conditions, pollution prevention, resettlement, biodiversity conservation, indigenous people rights and relationships. Dozens of organizations from the World Commission on Dams to the United Nations have established definitions of CSR.

Canada’s recent Round Table on Extractive Industries and Corporate Social Responsibility has embraced the eight IFC standards and has suggested adding best practices that would also cover:

1. Mine closure, reclamation and economic transition
2. Resettlement compensation
3. Compensation where impacts and land tenure have been well established
4. No siting in UNESCO World Heritage Areas
5. A definition of “broad community support”
6. Definition of how social and environmental assessment, management programs and mitigation actions should be carried out

The Round Table has recommended that the Canadian Parliament adopt CSR standards that include the IFC definition as well as the six additional areas above. One area on which there was disagreement among Round Table members was the view that power or mining developments should not occur on aboriginal land unless there was free, prior and informed consent by those aboriginal people who would be affected by the development. Canadian courts have been deciding standards for consultation; to date, there have been no court defined standards for free, prior and informed consent, but this seems to be one area where further definition will be provided through litigation.

Several mining, energy and power companies have set world leading examples of good corporate social responsibility associated with their developments. Placer Dome, in its development of a mine in northern Ontario, consulted extensively with four First Nations and two tribal groups. The agreement that was negotiated with impacted First Nations provided funding for expertise in environmental assessment and planning, ban on use of certain chemicals; involvement in decision-making; accords on treatment of religious, cultural and subsistence areas; 25% aboriginal employment, training assistance, business development including road construction, air transportation, freight, laundry, catering; an alcohol-free camp, employee assistance, donations to youth development, scholarships, funding for translators.

Manitoba Hydro has gone even further in CSR, not only incorporating all of the elements in the Placer Dome agreement, but also providing a significant community equity holding in its $1.4 billion hydro dam development. Development agreements being negotiated for pipelines from Alaska and the Canadian Arctic are involving extensive consultations on provisions covering community development, environmental standards, business development, training and employment, and other community benefits.

Good CSR constitutes not just mitigating negative impacts associated with energy and mining developments, but finding ways for these developments to bring significant economic and social benefits to local communities.

Corporate social responsibility continues to evolve. The most progressive, dynamic companies are those that are at the forefront of best practices, are demonstrating respect for the environment, sensitivity to community cultural values, and demonstrating how to bring long-term tangible economic benefits to affected communities. As energy and resource developments move further to the frontier, the potential for environmental and social conflict increases. Those companies that have good CSR records will be the companies that will be welcomed by communities as their partners.

For further information, please contact:

George Davies
Chair, Board of Directors – North-South Institute
Senior Consultant – Hatch Energy
Oakville, Ontario
+1 905 469 3415
GDavies@hatchenergy.com

The North-South Institute is dedicated to eradicating global poverty and enhancing social justice through research which promotes international cooperation, democratic governance, and conflict prevention. It is Canada’s first independent, non-governmental and non-partisan research institute focused on international development.