2017 Annual Report to Parliament: June 2016 – May 2017

The Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor
Government of Canada

Views expressed herein are those of the Office of the Extractive Sector CSR Counsellor

Errors and omissions remain the responsibility of the Office

October 2017

Executive summary

In accordance with the 2009 Order-in-Council (OIC) mandate, the Office of the Extractive Sector Corporate Social Responsibility (CSR) Counsellor produces an Annual Report to Parliament.^{Footnote 1} This report is the second prepared by the current Counsellor, Jeffrey Davidson.^{Footnote 2} It covers the period from June 2016 to May 2017^{Footnote 3} .

In addition to the OIC, the current Counsellor is guided by the Government of Canada’s 2014 Extractive Sector CSR Strategy, “Doing Business the Canadian Way”.^{Footnote 4} The current strategy promotes a more pro-active and preventative approach for the Office, with its insistence on companies reflecting their alignment with Government endorsed international CSR standards in their conduct and activities on the ground. The current strategy also emphasizes the importance of facilitating problem resolution early on, with the aim of minimizing risks of escalation into conflict or harm, while creating opportunities for continuous company-community engagement and for participatory forms of development.^{Footnote 5}

In line with the current strategy, the Counsellor’s second year concentrated on the Office’s advisory role, and its “early detection and intervention” function by extending outreach to countries where Canadian oil, gas and mining companies operate.

The Counsellor’s outreach during his second year consisted of:

• 4 Country trips and 8 project site visits
• 59 meetings with extractive companies
• 32 meetings with civil society organizations
• 27 meetings with foreign governments at local or national level
• 15 meetings with industry associations
• 5 meetings with mining CSR consultants
• 13 meetings with academic communities
• 14 presentations on the Office’s role and the government’s CSR expectations
• Participation in 9 externally organized outreach events
• 4 media interviews
• Training with Canadian trade commissioners and Ambassadors on post
• Screening of 42 companies or countries

These meetings, presentations and interactions have allowed the Counsellor to explain and advise on Government CSR expectations and also gain a better understanding of the needs and concerns of a range of stakeholders that are affected by Canadian extractive activities abroad. This approach has led some stakeholders to pre-emptively seek the Counsellor’s advice in recognition of their own potential CSR issues or evolving problem situations. The Office also provides direct guidance and support to Canada’s trade commissioners and Embassy staff to help them become effective CSR advocates and ‘eyes and ears’ on the ground.

The Office has continued to assess and track situations brought to its attention. It has implemented a screening program involving both countries and companies of interest. During the year, 42 companies or countries were screened. These efforts can and in some cases did result in the Counsellor’s Office initiating contact with stakeholders or even interceding with companies on another stakeholder’s behalf.

Over the period June 2016 – May 2017, the Office focused on the following key areas of work:

1. Continuing to clarify the ways in which the Office carries out its mandates
2. Expanding and amplifying its outreach and engagement program
3. Organizing visits to countries of interest, including Canadian project sites in order to understand context-specific challenges surrounding responsible mineral resource development
4. Screening and monitoring extractive activities in countries where Canadian companies are active and where significant social and environment challenges and risks relating to mineral resource development exist
5. Improving the Office’s transparency by continuously updating its website, communicating openly with media sources, and participating in workshops and conferences with civil society, academia and industry
6. Progressing and completing reports and intellectual products

This Report to Parliament also discusses specific internal and external challenges faced by the Office itself, as well as program initiatives and analytical work planned for the coming year. One of the more limiting conditions carried over from the first year has been the resource gaps faced by the Office, particularly relating to the recruitment and retention of qualified staff (both administrative and technical). This has interfered with the Office’s implementation effectiveness and capacity to strengthen certain important aspects of its mandate. Looking forward, the Office will:

• Amplify the scope of outreach to include monitoring and follow-up with companies, governments, and in-country stakeholders with whom the Office has already engaged
• Complete and release intellectual products initiated during the year, including the CSR Standards Navigation Tool and country trip reports
• Review the effectiveness of the Office and lessons learned to inform future Government of Canada policy and decision-making relating to responsible business conduct

The dynamic global context for Canadian extractive companies and for the promotion of responsible business conduct

The extractive sector remains a major focal point for Canadian investment abroad despite the continued weakness of international commodity markets. Given both the positive and negative impacts that extractive activities can have on local communities and ecosystems, Canada has an ongoing responsibility to ensure appropriate oversight of Canadian businesses operating outside its borders, and to provide forms of constructive intervention and remedy when justified. The Office is a key implementing unit of the Government’s CSR Strategy for the Extractive Sector, “Doing Business the Canadian Way.” The Office is committed to working collaboratively across stakeholder groups, including companies, civil society organizations at home and abroad, Canadian embassies, host country governments and local communities, for the purpose of promoting responsible Canadian business conduct and continuous improvement of company social and environmental performance.

Social and environmental impacts and risks associated with extractive activities continue to pose significant challenges for communities, extractive companies and host country governments. Demands for greater transparency and disclosure of financial, social and environmental information have continued to increase both from within countries and internationally^{Footnote 6} . Gaps between government, company and community concerns and objectives remain unbridged and in some cases have even widened. Local unrest, conflict and even national discontent around exploration and extractive activities are continuing realities. All of this exacts a heavy toll on communities, workers, companies, local government authorities and even national host and home governments, and further complicates prospects for securing and sustaining a safe and responsible mineral resource sector that:

• addresses community, government and company concerns,
• allows for an equitable sharing of benefits and responsibilities, and
• ensures accountability of all parties.

In a rapidly changing global political milieu and commodity marketplace, extractive companies in particular, have been hard pressed to maintain their own viability and remain competitive. This past year many of the larger corporations have streamlined staffing and operations, divested of weak assets and have introduced and implemented technology and management system innovations – all in order to improve productivity, reduce overhead and operating costs, and maintain profitability. Access to finance has remained a major challenge for smaller companies.

Irrespective of these ongoing financial and technical challenges, extractive companies operating overseas must still be responsive to host country and community concerns, values and aspirations regarding extractive activities. For companies, this requires a site level capacity to listen and engage transparently and honestly with local stakeholders. It means putting in place workable ways of acting on and redressing grievances. Business enterprises when entering such environments become agents of change, for better or for worse, and are increasingly expected to adjust their way of operating to support and contribute to the realization of national, regional and even local development priorities.

Companies that have committed themselves to operating responsibly take on the task of ensuring that their policies and practices reflect a complex, growing and demanding array of internationally recognized standards and guidelines. These “norms” cover a range of critical concerns, many of which are embedded in Canada’s endorsed CSR standards - from respect for human rights; to reduction of carbon emissions; to water use and conservation; to corporate transparency and governance; to the integration of social and environmental safeguards into their activities; to the inclusion of project affected people in benefit sharing, decision-making and project monitoring, among other things.

A recent report on key trends for the extractive industries suggests that many operating companies will need to “re-earn” their “social license to operate.”^{Footnote 7} This implies that companies have allowed their “licenses” to expire during the hard times of the recent commodity bust. When the “social license” expires, whether knowingly or by default, companies run the risk of allowing dissension and conflict to escalate. This puts both company operations and communities at risk; and the challenge of “re-earning” license and fixing or rebuilding relationships becomes much more difficult and costly.

Mineral resource development, at least into the foreseeable future, will continue to be an integral part of a global materials supply chain essential for the broad-based development of nation states and communities, even as the needs and demands for certain minerals change or shift.^{Footnote 8} As long as Canadian oil, gas and mining companies remain at the forefront of exploration and extractive activities and investment worldwide, they will need to remain vigilant, sensitive and responsive to the issues and concerns, risks and opportunities their activities raise for host countries and project affected peoples.

Some Past Year Developments of Note

Innovation. This has not been limited to improving production processes, but has included improved and innovative ways of monitoring, mitigating and managing environmental and social impacts, and for expanding the scope of consultation. Canadian companies have for example introduced changes in procedures and technologies that improve water conservation and reduce water losses in process systems (e.g. changeover from wet to dry-stackable tailings); that minimize use of groundwater resources (e.g. enhanced water recycling, desalinization plants), that monitor operating and water control systems on a real time basis; that enable community participation in environmental monitoring (e.g. through telecommunication and GPS technologies); and that diagnose and track community health issues in remote areas.

Standards and Guidelines. This past year, supply chain issues have become an increasingly important part of the international conversation regarding responsible business conduct. The OECD Due Diligence guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas^{Footnote 9} was further clarified and expanded to include all minerals, and a new draft Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractives Sector was released as part of the OECD’s Responsible Business Conduct Initiative.^{Footnote 10} In Canada, member companies of the Mining Association of Canada made a formal commitment to implementing the Voluntary Principles on Security and Human Rights at both their domestic and international projects and operations.^{Footnote 11}

Relevant Home State Developments. There were a number of home state initiatives of note. This past year, the European Commission initiated consultations for the development of non-binding guidelines for reporting of non-financial information^{Footnote 12} , to support the implementation of its 2014 Directive^{Footnote 13} on disclosure of information on environmental, social and employment, human rights, anti-corruption and anti-bribery matters. While stakeholders within Canada have raised this concern and the Toronto Stock Exchange has voluntary guidelines for disclosure of environmental, social and governance risks, consensus has yet to be reached in Canada on measures for ensuring more consistent and complete disclosure.

Recent policy initiatives that will have implications for Canadian business conduct overseas include Canada’s endorsement without reservation of the United Nations Declaration on the Rights of Indigenous Peoples (May 2016), Government’s decision to monitor the status of indigenous peoples’ human rights in the Americas,^{Footnote 14} and its formalization of guidelines for supporting human rights defenders internationally.^{Footnote 15}

Legal Remedies for Alleged Harms. This past year Canadian courts in British Columbia agreed to hear two cases brought by foreign nationals against Canadian companies operating mines in Guatemala^{Footnote 16} and Eritrea^{Footnote 17} . These two cases along with another lawsuit, now before the Superior Court of Ontario^{Footnote 18} have opened the door for foreign citizens to pursue remedy in Canadian courts for alleged misconduct or harms resulting from the activities of Canadian extractive (or other types of) companies operating outside of Canada.

Across a range of stakeholder groups, a major point of discussion during the year has been identifying viable options for the strengthening of Canada’s approach to promoting responsible business conduct. No final conclusions were reached, and to the disappointment of a number of groups, a formal request and proposal to create an independent ombudsperson function^{Footnote 19} was not acted on.

About the Office of the Extractive Sector CSR Counsellor

The Office of the Extractive Sector Corporate Social Responsibility (CSR) has a dual mandate to:

• Advise companies and other stakeholders on the implementation of CSR performance standards and guidelines endorsed by the Government of Canada, and
• Review the CSR practices of Canadian extractive (mining, oil and gas) companies operating outside of Canada.

The Office of the Extractive Sector CSR Counsellor was established by an Order in Council in March 2009.^{Footnote 20} The Counsellor acts as a special advisor to the Minister of International Trade known as the Extractive Sector Corporate Social Responsibility Counsellor. The first Counsellor, Dr. Marketa Evans, was appointed in October 2009.^{Footnote 21} On March 1, 2015 the Minister of International Trade announced the appointment of the current Counsellor, Mr. Jeffrey Davidson, who officially began his work in May 2015.^{Footnote 22} The Office is now situated in Ottawa, but also maintains a meeting place in Toronto, where many of the major mining companies are headquartered.

The Counsellor works under the terms established in the original 2009 Order-In-Council, but is guided by a mandate letter provided by the Minister of International Trade and by the Government of Canada’s Extractive Sector Corporate Social Responsibility Strategy. From 2009-2013, the Counsellor worked within the framework laid out in the Government’s initial CSR Strategy, entitled “Building the Canadian Advantage.” In November 2014, an updated and enhanced Strategy was released, "Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad".^{Footnote 23} Mr. Davidson’s work is guided by the direction provided in the current Strategy.

To learn more about the Counsellor’s position and Mr. Davidson’s background and expertise please refer to Appendix A. For a brief history and further explanation of the Government of Canada’s current CSR Strategy for the International Extractive Sector, please refer to Appendix B.

The Office’s approach

The Office has made, and will continue to make outreach, active listening, sharing of ideas, and understanding of real-world situations hallmarks of its approach. In so doing, the Office communicates a constant message regarding the vital importance of pre-emptive and continuous engagement and dialogue between companies, communities, local area governments, and other affected groups.

The Office engages on a regular basis with stakeholders including, but not limited to: project-affected people, Canadian mining, oil and gas companies, consultants and service providers, lawyers, civil society organizations, the academic community, host country governments and Canadian government departments in Canada and its missions abroad. The new relationship with the Trade Commissioners on post has been extended to include the diplomatic corps, especially the country Ambassadors, opening up direct lines of communication between the Embassies and the Counsellor.^{Footnote 24}

The Office has been able to develop and foster positive relationships with this wide range of actors, allowing the Counsellor to stay informed, monitor concerns and emerging situations around specific projects, and conduct early intervention to foster and facilitate dialogue, problem solving, and agreement making.

In accord with the current Extractive Sector CSR Strategy, “Doing Business the Canadian Way” the Counsellor has invested most of the Office’s energy and attention in advisory services, early detection work and constructive interventions. This methodology emphasises the importance of identifying and resolving disputes in their early stages. The Office is strategically positioned to be able to work constructively with all parties to help them:

• identify the critical issues that may be dividing them
• converge on common interests that provide a basis for dialogue
• find solutions or remedies and reach agreements

Similarly, the Counsellor determined that the office’s resources would be more efficiently utilized when directed towards prevention - advising companies on the implementation of good practices at operating sites, and providing guidance on how to predict and react to situations that could potentially turn into disputes, escalate into conflict, or just be avoided.

Given the 1,425 mining companies^{Footnote 25} with assets abroad, spread across 102 countries, the efficient use of the Office’s resources is key to successful oversight and promotion of responsible business conduct with Canada’s extractive sector companies working overseas.

Formal mediation in more complex cases (especially those involving legacy issues or multiple stakeholders) may be better served by Canada’s National Contact Point (NCP) which has a formalized dialogue and dispute resolution mechanism based on the OECD Guidelines for Multinational Enterprises.

Retrospective on the current Counsellor’s Second Year

Over the period from June 2016 to May 2017, the Office focussed on the following key areas of work:

1. Continuing to clarify the ways in which the Office carries out its mandates
2. Expanding and amplifying its outreach and engagement program
3. Organizing visits to countries of interest, including Canadian project sites in order to understand and be in a position to address context-specific challenges surrounding responsible mineral resource development
4. Screening and monitoring extractive activities in countries where Canadian companies are active and where significant social and environment challenges and risks relating to mineral resource development exist
5. Improving the Office’s transparency by continuous updating of its website, communicating openly with media sources, and participating in workshops and conferences with civil society, academia and industry
6. Making progress on reports and intellectual products

1. Continuing Clarification of the Mandate. In the Counsellor’s first annual report, the Counsellor laid out a set of aims for crafting a different kind of approach that would be:

• Collaborative, not adversarial in nature
• Evidence based
• Reflective and sensitive to all stakeholder concerns
• Situated to be able to work the middle ground, fostering dialogue and identifying potential solutions and remedies for existing or emerging problem situations

The Office has endeavored to work in line with these aims. This year the Office explored the value of undertaking more extensive country visits including Canadian project site visits in country (see section 3 below for an expanded discussion of these visits). These trips could not have been carried out without adopting a collaborative approach. In order to understand country-specific and project specific contexts, it was critically important for the Office to move beyond allegations, review whatever factual information or evidence of problem situations existed and to take into account all stakeholder concerns. In a way, the country visits also served to test the limits of “fact finding” undertaken directly by the Office, its usefulness as well as limitations given the way the Office is currently structured and resourced.

The Office was able with the addition of two new technical staff, to expand the scope of outreach, as well as research. This allowed the Office to carry out more consistent screening and monitoring of existing and emerging situations (see section 4 below). This required clarifying the meaning of screening^{Footnote 26} and its relationship to the review function of the Office, which is triggered by a written request.

Unlike the review, which is part of a formal process, screens and preliminary assessments are less formal information gathering exercises which lay the groundwork for deeper understanding of context and situations , and for determining the need for any further actions on the part of the Office or the Counsellor. They can and have resulted in direct follow-up with the companies involved, shifts into early intervention mode, and assessment of how responsive or committed companies are to working in ways that reflect Canadian values and expected alignment with international CSR standards.

The Office has yet to recommend “sanctions” on a company either for an unwillingness to respond to or engage with the Office on an issue or issues of concern, or for what the Counsellor may deem to be a lack of good faith efforts to work responsibly. This does not mean that such cases do not exist or that such recommendations will not be made when warranted in the future. This past year some progress was made in clarifying criteria, conditions and procedures for making such recommendations, but these will need to be finalized next year.

2. Outreach and Engagement.

The Office has continued to be a promoter of responsible conduct, and a shared resource for companies, Embassies and civil society groups seeking to ensure responsible social and environmental practices and performance in the extractive sector. The Office’s outreach activities are an extension of its advisory role.

Within Canada, the Office has increased its engagement with the academic community, including presentations and participation at academic conferences and roundtable discussions organized by various Canadian universities. The Counsellor and Office have participated in events organized by Queens University, the Université du Québec à Montréal (UQAM), the Munk School of Global Affairs (University of Toronto), Carleton University, Ryerson and York Universities.

The Office has also continued to interact directly with Ambassadors, Trade Commissioners and other Embassy staff during their visits to headquarters in Ottawa, and when back on post. Internal outreach has also included various regional and thematic civil service units within Global Affairs Canada, with Natural Resources Canada’s Lands and Minerals Sector, with the Royal Canadian Mint, and with Export Development Canada. During the Prospectors and Developers Association of Canada 2017 conference, the Counsellor contributed to Government-organized training and workshop sessions.

The Office met with foreign stakeholders visiting Canada, often to discuss issues of specific concern. This year stakeholders have included government and political figures (foreign parliamentarians and congress-people from Senegal, Argentina and Venezuela, Brazil’s Minister of Mines and supporting staff from the country’s Geological Survey and Mines Ministry, Peru’s Minister and Vice Minister of Mines and Colombia’s Vice Minister of Mines); representatives from non-government organization (the Geneva Centre for the Democratic Control of Armed Forces, the International Committee of the Red Cross, Business and Human Rights Resource Centre); and from multi-lateral organizations (the United Nations Working Group on Business and Human Rights, the UN Global Compact).

Outside of Canada, the Counsellor has held extensive face-to-face meetings with Canadian companies operating in countries visited, with foreign government officials at all levels, Canadian diplomats on post and local community and civil society stakeholders.

The flip side of outreach and engagement is the provision of advisory “assistance”,^{Footnote 27} to companies, embassy staff and/or communities. About half of the company meetings the Counsellor’s office had this year were initiated by the companies themselves. These meetings often involved the sharing of information, feedback and suggestions for improving practices and dealing responsibly with difficult issues or situations.

3. Country Visits

This year’s country visits were expanded versions of the country visits of his first year, which were undertaken to develop a better understanding of country specific issues. All of this past year’s visits were to countries in South America, including three to Central American countries (Honduras, Guatemala and Panama) and the fourth one to Argentina. In all cases, the visits were organized in response to requests from the Canadian Ambassadors and involved countries in which extractive industries have had a contentious past or present. On these visits, the Counsellor met^{Footnote 28} with representatives of civil society, a cross-section of Canadian extractive companies, with business and industry associations, with central government officials, with CSR practitioners and consultants, with academics from a number of institutions, and with Canadian Embassy staff. The Counsellor participated in events and meetings that provided opportunities for the Counsellor to explain the Canadian Government’s approach to promoting and supporting responsible business conduct. The Counsellor also delivered a training module using video conferencing from Honduras to Trade Commissioners across posts in the region.

Unlike the first year country visits, all of this year’s trips included visits to the field operations of a sample of Canadian mining companies operating in the country. Site visits included meetings with project management teams, and with representatives of local stakeholder groups, communities and heads of municipal governments whenever possible. Site visits in all cases provided the Counsellor’s delegation^{Footnote 29} with a first-hand sense of how Canadian companies were addressing social and environmental challenges and building relationships with project affected communities and local government authorities. The site visits also allowed the Counsellor to meet with project affected people and groups, who were then able to make known their own views, concerns, and hopes, face-to-face.

Opportunities to engage directly with project affected peoples varied from country to country.^{Footnote 30} A particularly significant experience occurred in Honduras when the Counsellor and Canada’s Ambassador visited one of the project sites together. This enabled the Ambassador in the company of the Counsellor to gain insights into the complexities of the particular situation and of working responsibly at the project level; it was also the first time that the local community visited felt it had the attention of high level Canadian government officials focused on their predicament.

Project sites visited included:

• Honduras: the San Andres Mine of Aura Minerals^{Footnote 31} and the San Martin mine site of Goldcorp
• Guatemala: the Escobal Mine of Tahoe Resources^{Footnote 32} and the Marlin Mine of Goldcorp
• Panama; the Cobre Panama project of First Quantum Minerals and the Cerro Quema project of Pershimco Resources^{Footnote 33}
• Argentina: the Gualcamayo Mine of Yamana Gold and the Veladero Mine of Barrick Gold

These on-the-ground experiences allowed the Counsellor and his staff to constructively and critically engage not only with companies’ managers on site, but also with head office managers, before, during and after the visits, to discuss problems as well as to make suggestions for improving policies and practices at the project sites.

These in-country visits also proved to be limited, but valuable exercises in “fact-finding”, allowing the Counsellor to try to get to the “heart” of whatever matters were troubling the companies, local communities and/or government authorities. Preliminary learnings were discussed by the Counsellor in a number of public and academic forums.^{Footnote 34} Contextual challenges and specific issues and learnings will be shared in greater detail in written country trip overviews. These are being prepared, and will be made available publicly on the Office’s website in the coming months.^{Footnote 35}

Gaining a better country-specific understanding of CSR and extractive resource development issues has been a crucial element of the Office’s evolving approach. This has involved expanding the scope of a country visit to include trips to select or representative Canadian projects or operations and creating opportunities for local communities to have their voices heard. It remains to be seen whether such an approach can generate value for the Canadian companies and project affected communities, for host country governments, for Canada, its citizens and the extractive industry as a whole. If nothing else, they may provide the basis for more open and honest public as well as private discussions of critical issues and possible ways to resolve difficult situations. The interactions and learning involved have better positioned the Office to respond to any future calls for assistance or to address in-country issues or situations involving Canadian companies if (or when) they might occur.

4. Screening and Monitoring

The Office was able to expand its in-house research capacity^{Footnote 36} allowing it to screen specific situations in which Canadian extractive companies were involved. In most cases the research undertaken has been property or project-specific often triggered by public reporting of incidents or by requests from trade commissioners on post for a third party opinion on how serious or troubling a particular incident or situation might be.^{Footnote 37} Country-level research was also carried out in advance of three of the Counsellor’s four country visits^{Footnote 38} to flag any important issues or concerns that should be further explored when in country.

The majority of the project specific situational analyses completed were based on desk research and were of a preliminary nature. In a few cases the scope of the research was expanded to take a more holistic view of a company’s operations across jurisdictions or was supplemented by research on the country in which the Canadian company’s activities are concentrated.^{Footnote 39}

Screening has allowed the Counsellor to assess the seriousness of particular situations and the need for further study or monitoring; and in certain cases has resulted in the Office initiating direct contact with the company being screened, and in the periodic monitoring of existing or emerging situations.

What has been revealing this past year is that the Office has self-initiated a total of 42 screens^{Footnote 40} , but has received no formal requests for review. A request for assistance which the Office received during its first year ended up with Canada’s National Contact Point (NCP). The NCP completed its formal review of the situation this year.

5. Improving Transparency.

This past year, the Counsellor’s website was reorganized and its content updated in both English and French. Updating now occurs on a bi-weekly basis, offering more expeditious reporting of the Office’s activities. The Office also posted Spanish translations of key information and documents. Since the website is the Office’s principal vehicle for information sharing and given that most of Canadian exploration and mining activities and investments are concentrated in Latin America, it was important to make information accessible to stakeholders from the region that are not comfortable in French or English. The Office’s country trip overviews from Latin America will be posted on the website in English, French and Spanish.

The Counsellor continued to maintain the Office’s open door policy of inviting meetings with companies, industry associations, non-government organizations, consultants, individuals and others, without discrimination, to discuss issues or review situations of common concern. The Counsellor continued to convey information regarding the activities of the Office and the results of its work openly and frankly in front of a range of audiences. Substantive presentations were posted on the Counsellor’s website in multiple languages, and stakeholder meetings were listed.

6. Progress on Intellectual Products and Reports

The Office completed the 2013 draft and published the Office’s closing report relating to the formal review of Cerro de San Pedro mine (Mexico) and New Gold Inc. following the receipt of comments from the parties involved. The closing report is posted on Counsellor’s website.^{Footnote 43}

Work continued on the Office’s CSR Navigation Tool for Canada’s six endorsed international standards, initiated last year.^{Footnote 44} The Tool was completed in draft form and posted for external comment in May.^{Footnote 45} The Tool is structured to allow stakeholders to quickly identify critical themes and issues related to their own projects, and then to find out what principles of conduct or good practices may apply to their own situations that are addressed by the endorsed standards.

The drafting of the country trip overview reports has proved to be more complicated and time consuming than originally anticipated, given the complex nature of the countries visited, the project site situations and the sensitivity of all the stakeholders to the way in which information may be conveyed and language used to describe both context and situations. These reports are not meant to be descriptive summaries of where the Counsellor went and with whom he met, but rather to contain more substantive content and analysis, including a review of concerns and issues raised and explored, of existing risks and possibilities, of insights gained, and possible pathways forward, with special attention paid to the roles and responsibilities of Canadian actors (companies, Canada’s government, and civil society organizations) present or active in the country. All four reports were completed in draft form and are in various stages of review for fact checking and revision.

Some of the key foundation pieces for a more robust and effective Government (home country) approach to promoting and assuring responsible business conduct from Canadian oil, gas and mining companies operating outside of Canada are now in place. Whether this approach is sufficient for minimizing risk and contributing to positive outcomes for Canadian companies, host country governments, local communities and Canada must be further tested.

Outreach - Meetings, Presentations, and Media Publications

The Counsellor’s outreach during his second year consisted of:

• 4 Country trips and 8 project site visits
• 59 meetings with extractive companies
• 32 meetings with civil society organizations
• 27 meetings with foreign governments at local or national level
• 15 meetings with industry associations
• 5 meetings with mining CSR consultants
• 13 meetings with academic communities
• 14 presentations on the Office’s role and the government’s CSR expectations
• Participation in 9 externally organized outreach events
• 4 media interviews
• Training with Canadian trade commissioners and Ambassadors on post
• Screening of 42 companies or countries

Select Outreach Events:

• Revenue Transparency, Resource extraction –based economic development in the Developing and Underdeveloped worlds, and the challenge of corruption York University, Toronto, Canada May 16-18, 2017
• Canada’s Past and Future in the Americas Carleton University, Ottawa, Canada March 27, 2017
• Security and Human Rights at the Exploration Stage Prospectors and Developers Association of Canada, Toronto, Canada March 8, 2017
• Understanding International Mining Munk School of Global Affairs, Toronto, Canada March 8, 2017
• Annual Convention Prospectors and Developers Association of Canada, Toronto, Canada March 5, 2017
• Book Launch: La responsabilité des entreprises dans le secteur Minier: Réponse ou obstacle aux enjeux de développement en Afrique? l'Université du Québec à Montréal (UQAM ), Montreal, September 29, 2016
• Workshop: Global Actors and Community-Level Security in the Extractive Sector Queen’s University, Kingston, Canada September 15-16 2016
• Workshop: Municipal Financial Management of Mining Royalties, Panama City, Panama September 6, 2016
• Workshop with Guatemalan Government Representatives, Guatemala City, Guatemala August 16, 2016
• International Transparency Working Group Event, Guatemala City, Guatemala, August 9, 2016
• Convertirse CSR Conference, San Pedro Sula, Honduras July 27, 2016

Media Reports:

• Diario La Provincia, Consejero de RSE de Canada visitara la mina Veladero, December 1, 2016
• CBC New Canada “’No real role’: Canada’s watchdog for mining abroad struggles to sharpen its teeth”, November 20,2016
• The Hill Times –“Under fire, Canada’s CSR counsellor shows his work” November 9, 2016
• The Hill Times – “Liberals ‘seriously’ considering mining ombudsperson, says federal corporate social responsibility adviser” November 9, 2016
• Open Canada – “Between rock and responsibility” June 3, 2016

Canadian Oil, Gas, Mining and Industry Service Companies:

AB Minerals, Anfield Gold, Aura Minerals, Barrick Gold, Continental Gold, Cornerstone Capital Resources Inc., Excellon Resources, Fio Corporation, First Quantum Minerals, Goldcorp, Gran Tierra Energy, Hudbay Minerals, Ivanhoe Mines, Jaguar Mining, Kinross Gold, Lundin Mining, Nevsun Resources, New Gold, Orla Mining, Pan American Silver, Pershimco Resources , Red Eagle Mining, Rio Tinto Alcan, Semafo, Sentient Group, Yamana Gold, Tahoe Resources, Toronto Stock Exchange

Civil Society Organizations:

Asamblea Jachal no se Toca , Archbishop of Tegucigalpa (Honduras), Asociacion de Organizaciones no gobernamentales de Honduras (ASONOG), Business and Human Rights Resource Centre, Centro de Accion Legal Ambiental y Social de Guatemala (CALAS), Centro de Incidencia Ambiental de Panama (CIAM), Colectivo de Abogados Jose Alvear Restrepo (Colombia, CCAJAR), Diocesan Committee in Defense of Nature (CODIDENA, Guatemala), Equipo Jesuita de ERIC (Honduras), Fundacion Ambiental de Recursos Naturales (FARN, Argentina), Geneva Center for Democratic Convention of Armed Forces (DCAF), International Committee of the Red Cross (ICRC), La Puya Resistance Movement (Guatemala), Net Positive, Oficina de Derechos Humanos del Arzobispado de Guatemala, Oxfam Guatemala, Oxfam Honduras, Plataforma Internacional (Guatemala), Plurijur (Guatemala), Proyecto de Derechos Economicos, Sociales y Culturales (ProDESC, Mexico), Radio Progreso (Honduras), United Steelworkers Association

Academic Communities:

Carleton University, Catholic University of Argentina, Facultad Latinoamericana de Ciencias Sociales (FLACSO, Argentina), Guatemalan Association for Research and Social Science (ASIES); Instituto CentroAmerican de Fiscales (Honduras), McGill Research Group Investigating Mining in Latin America (MICLA), Munk School of Global Affairs (University of Toronto), Programme de Renforcement de la gouvernance du secteur extractif en Afrique de L’Ouest, Universite du Quebec a Montreal (UQAM), Ryerson University Institute for the Study of Corporate Social Responsibility, Universidad Nacional de San Juan (Argentina), Universidad Tecnologica Centroamericana (Honduras), University of Ottawa, York University

Industry Associations:

Camara Argentina de Empresarios Mineros (CAEM), Camara de Comercio Guatemalteco-Canadiense (CanCham), Camara Minera de Panama (CAMIPA), Centro para la accion de la responsibilidad social en Guatemala (CentraRSE), Fundacion Hondurena de Responsibilidad Social Empresarial (FundhRSE), Global Energy, Minerals and Markets (GEMM), Gremial de Industrias Extractivas de Guatemala (GREMIEXT), Instituto Argentina de Petroleo y Gas (IAPG), International Council on Mining and Metallurgy (ICMM), Mining Association of Canada (MAC), Red de Integración Centroamericana por la Responsabilidad Social Empresarial (ConvirtiRSE)

CSR Consultants:

Compass Q Inc, Primoris Associates, SEF Canada, Sustainalytics

Foreign Government Offices and Multilateral Institutions:

Argentina: Fundacion Red de Accion Politica, Minister of Mines of San Juan, Ministry of Environment and Sustainable Development, Ministry of Hydrocarbons of the Province of Chabut, Municipality of Jachal, OECD National Contact Point for Argentina, President of National Mining Commission, Secretariat of Human Rights, Secretary of Mining

Brazil: Ministry of Mines and Energy

Colombia: Vice-Minister of Mines

Guatemala: Office of the Human Rights Commissioner of Guatemala

Honduras: Honduran Institute of Geology and Mines, Human Rights Commissioner of Honduras, Human Rights Commissioner of Santa Rosa de Copan, Ministry of Environment and Mines (SERNA/MiAmbiente), Municipal leader of La Union, Municipal leader of Palos Ralos, Municipal leader of San Ignacio, Secretariat of Energy, Natural Resources, Vice Minister of Trade, Investment and Economic Development (PROHONDURAS)

Panama: Minister of Government, Minister of Labour, Ministry of Commerce and Industry, Ministry of Environment, Municipality of La Pintada, Mayor of Tonosi, Mayor of Macaracas, National Ombudsman (Defensoria del Pueblo)

Peru: Minister of Mines, Vice Minister of Mines

Senegal: Parliamentarians with an interest in mining

Multilateral Organizations: International Finance Corporation (IFC), Organization for Economic Co-operation and Development (OECD), United Nations Environmental Program (UNEP), United Nations Global Compact Canada (UNGC), United Nations Working Group on Business and Human Rights

Challenges and Next steps

The Office of the Extractive Sector Corporate Social Responsibility has continued to demonstrate the value that can be created for stakeholders through its advisory and review functions.

While the current Counsellor’s first year focused on reviving, reshaping and revitalizing the Office after it was dormant for over one year, the Counsellor’s second year focused on expanding the scope of the Office’s outreach to relevant stakeholders, including those in countries where Canadian oil, gas and mining companies are operating. This was carried out mainly through country visits, participation in more inclusive conferences and workshops and in policy forums focusing on country and sector specific issues. Many of these efforts and activities are described in the retrospective summary of the Office’s activities during the past year (above).

By expanding the scope of outreach and engagement, the Office had to deal with a number of internal and external hurdles and constraints, some of which the Office was able to overcome, and others which it could not. One of the lessons learned was that the Office, given its resource constraints, over-stretched its capacity to deliver products in a timely way. This applied to its work on the CSR Standards Navigation Tool to the international standards^{Footnote 46} , and also to its planning, implementation, analysis and reporting relating to its country trips. In retrospect, the Office was clearly over-ambitious in its scheduling of country trips, and in what it hoped to accomplish during each of the trips.^{Footnote 47}

Some of the challenges faced by the Office are entrenched in the inherited architecture of the Office. While the Government’s CSR strategy was updated and revised in 2014, the administrative and financial architecture was not. The Office will likely have to live with this and work as best it can within existing constraints at least for the coming year.

The first two challenges described below are carry-overs from the first year and reflect the difficulties imposed by the existing architecture. The third one relates to continuing clarification of the Counsellor’s quasi-sanctioning authority and the Office’s formal review mechanism, and the fourth one, to the limited engagement realized thus far between the Office and certain stakeholder groups within industry and civil society.

1. Staffing and Administrative support: The Counsellor was only able to secure administrative support for the operations of the Office for three out of twelve months of his second year in office. The Counsellor and his staff spent between 25-30% of their time on administrative tasks.
2. Budget challenges: The Counsellor had no fixed budget, and had to seek approval and funding from the public service for every event, trip or special activity in which it proposed to participate. This was irrespective of whether the event or travel was domestic or international. The lack of any small discretionary funds also prevented the Office from participating in potentially significant but last minute out-of-town events that came to the Office’s attention.
3. Further clarifications: A decision was made to retain the formal review mechanism in the 2014 updated strategy. The process is described on the Counsellor’s official website, even though it has not been formally invoked since the current Counsellor took office in May 2015. Some of the reasons for this have been discussed above. Whether the existing mechanism should be strengthened or improved is an open question and a matter of strategic priorities. On top of this, remaining legal and procedural ambiguities relating to the recommendation and application of sanctions, i.e. the withdrawal of services, may complicate, but should not prevent, the implementation of this authority should it be needed.
4. Engagement and dialogue with reticent communities of interest: This remained problematic in terms of the ability of the Office to reach out to and engage with significant components of the broader stakeholder community. Junior exploration and mining companies and certain civil society groups have been reluctant or reticent to engage with the Office of the Counsellor, each for their own reasons. In the case of the former, past efforts on the part of their own associations (both the BC Association of Mineral Exploration and the Prospector and Developers Association of Canada) to increase member awareness and open the door to dialogue have had limited success. As for the latter, some of the civil society organizations have refused to meet formally with the Counsellor until such time as the Government issues a revised or new Order-in-Council.^{Footnote 48}

Next Steps

• Amplification of the scope of outreach in different ways, including follow-up with companies, governments, and in-country stakeholders with whom the Office has already engaged
• Completion and dissemination of intellectual products initiated during the year, including the index to endorsed Government of Canada standards, and country trip overviews
• Review of the effectiveness of the Office and lessons learned to inform future Government of Canada policy and decision-making relating to responsible business conduct

1. Amplification of outreach, but in different ways

This past year the Counsellor made a significant change to the scope of Country trips. In the belief that it was not sufficient to remain in the capital cities and engage only with national stakeholders, the Counsellor included visits to select project sites of Canadian companies in all of the country trips undertaken. As mentioned above, these site visits were meant to give the Counsellor a first-hand sense of how well Canadian extractive companies were addressing social and environmental challenges on the ground, how successful they were in building positive relationships with local communities and government authorities, and how their presence was perceived by local stakeholders. This approach was implemented and tested during this year’s country visits. The value that these visits are able to generate in the short term was clear, but it remains to be seen whether such trips can lead to longer term benefits for the stakeholders and parties involved.

For the coming year, the Counsellor will cut back on the number of extended country visits^{Footnote 49} , possibly to another one or two at most^{Footnote 50} . There may be other shorter visits of a different nature focusing on a specific site or high risk issue.

Given the fragility or instability of the relationships and situations that exist in the places visited or between the stakeholders involved, it may be more helpful and important for the Office to remain directly connected to key stakeholders in countries and projects already visited. This will mean allocating more time and attention to tracking and to staying on top of existing and emerging situations already identified or encountered.

2. Completion and Dissemination of intellectual products

The Office will complete and disseminate products already in progress, including the CSR Standards Navigation Tool for Canada’s endorsed international standards and the outstanding country trip overviews.

A draft of the Tool was disseminated for comment. Comments received and suggestions made will be incorporated into a final draft version for additional circulation. In the coming year, the tool will be finalized, and disseminated in two user friendly formats, one of which still needs to be developed.^{Footnote 51} The goal is to have the tool finalized and formally launched at the time of the next Prospector and Developers Association meeting in Toronto, March 2018.

It is anticipated that the country trip overview reports will be finalized in the coming months, vetted with key stakeholders, and then made available to the public in three languages on the Counsellor’s website.

3. Review of the Extractive Sector CSR Counsellor model – the experience, lessons learned and future policy implications

Looking ahead, a number of key process issues as well as existing structural impediments to the Office’s effective operation will ultimately need to be addressed, should the Government decide to retain the Office beyond its existing mandate which expires in May 2018, or should the Government decide to make it a permanent component of a more holistic “responsible business conduct” strategy. Whatever technical assistance, support or advice the Office is able to provide to the Office of the Minister of International Trade (OMINT) will need to take into account Government policy clarifications or revisions to its thinking regarding responsible business conduct, its promotion and oversight, as they become more concrete.

The Office will undertake a review of its experience since the 2014 updating of the Government’s Extractive Sector CSR strategy. The aim of the review will be to share learnings with the Government and other stakeholders regarding what aspects or elements of the CSR Counsellor model seem to have worked well and those aspects which have not. The review would also provide some suggestions or guidance on whither to from here. It is clear that the issues and challenges surrounding responsible business conduct when Canadian companies choose to operate overseas, will continue to exist and will continue to raise “red flags” not only for the viability and sustainability of Canadian enterprises and their overseas projects, but also for host country governments, local communities, and for the Canadian Government and its own citizens.

Appendix A

Background on the Extractive Sector CSR Counsellor

The Counsellor is appointed as a Special Advisor to the Minister of International Trade, for a term of three years. The position of the Counsellor is equivalent to that of an Assistant Deputy Minister. The Office has benefited from significant support and expertise provided by Global Affairs Canada (the former Department of Foreign Affairs, International Trade and Development (DFATD)), Natural Resources Canada and the former Canadian International Development Agency (CIDA), now integrated into Global Affairs Canada. While the Office greatly benefits from this support, the Office’s operations lie outside of the department’s bureaucracy.

Biography of the Extractive Sector CSR Counsellor

Jeffrey Davidson is Canada’s current Extractive Sector CSR Counsellor. He has been involved with mining and mineral resource development for the past 35 years as a project engineer, policy and program advisor, consultant, community worker and professor. His career has been almost equally divided between the university (17 years) and the mining industry (14 years) with another 4 years in the Mining Policy Unit of the World Bank. His career focus from the start has been on finding ways of bridging the social and technical divide between community concerns and company interests, specifically with extractive activities.

At both McGill (1984-1995) and later at Queen’s (2011-2015) universities, he taught courses on mineral industry economics, mineral policy evolution, and on the social, environmental and ethical dimensions of mining practice. Almost all of his years in the industry concentrated on community engagement and relationship building, conflict resolution, social risk and performance assessment. He served as the site-level community relations and sustainability manager for Placer Dome Latin America at its Las Cristinas gold project in southern Venezuela (1996-2000) and later for Energy Resources of Australia at the highly controversial Ranger open pit uranium operation (2006-2007), working directly with both indigenous and non-indigenous communities. He also had the opportunity to work on regional (with Placer Dome) and global (with Rio Tinto) practice teams and technical evaluation groups providing social due diligence and social performance support and assessment for projects in Australia, Chile, Costa Rica, the Dominican Republic, Mongolia, Niger, Peru, South Africa, the United States, and Zimbabwe.

When Mr. Davidson joined the World Bank Mining Policy Unit (2001-2005), he coordinated and grew the Communities and Small Scale Mining knowledge sharing initiative. He co-managed the design and development of the World Bank – International Council on Mining and Metals (ICMM) Community Development Toolkit. He also worked on country mining sector projects in Romania, Mongolia, Mozambique and Nigeria.

During his career, Mr Davidson has also advised First Nation and Inuit communities in Quebec on impact assessment and mitigation, and on agreement making with mining companies. In 2013, he participated with 13 other legal and civil society professionals to write a book in layman’s language on Mining Contracts: How to Read and Understand Them, under a Creative Commons license to help non-specialists understand how contracts are negotiated and “what they say.”

He is a graduate of Columbia University (New York), Montana School of Mines and McGill University (Montreal), with degrees in mining engineering and cultural geography.

Appendix B

Background on the Government of Canada’s CSR Strategy for the International Extractive Sector

In March 2010, the Office of the Extractive Sector CSR Counsellor was opened in response to stakeholder calls for balanced, effective conflict resolution between Canadian extractive sector companies and project-affected stakeholders overseas. These calls came from both industry and civil society during the National Roundtables in 2006. Civil society organizations expressed a hope that the CSR Counsellor’s Office would contribute to positive change on the ground; industry saw the Office as “a positive step towards further enhancing our [industry] CSR commitments” and the review process of the Office was described as a “valuable forum for parties to engage in constructive dialogue and work through differences.” The Office of the Extractive Sector CSR Counsellor was established as one of the four pillars of Canada’s CSR Strategy for the Canadian International Extractive Sector called “Building the Canadian Advantage” in 2009.^{Footnote 52}

The emerging 2009 Strategy was not only a response to stakeholder concerns, but also sought to improve the competitive advantage and reputation of Canada’s extractive sector companies operating overseas by enhancing their ability to manage social and environmental risks. The Strategy was formally reviewed and re-evaluated in 2013 and 2014 by Canada’s Department of Foreign Affairs, Trade and Development (DFATD) in collaboration with Natural Resources Canada (NRCan). An array of industry and civil society organizations were invited to comment on the initial experience, and share thoughts on how the Strategy could be improved.

The Strategy was consequently updated and enhanced, with additional guidance provided to the Office of the Extractive Sector CSR Counsellor. It was released November 2014. The current Strategy includes a number of significant enhancements and shifts in work focus, including:

• An expanded list of endorsed CSR standards and norms (from four to six) and explicit referencing of two Canadian industry association CSR frameworks
• Designation of Canada’s Trade Commissioners working at Canada’s missions abroad as in-country advocates for CSR and as “eyes and ears” on the ground
• A more concentrated focus on promotion of good practices, early detection of problem situations and constructive interventions on the part of the Counsellor to help reduce the risks of conflict escalation and identify solutions
• Authority given to Canada’s National Contact Point (NCP) and to the Counsellor to recommend the withdrawal or denial of Government economic and trade advocacy support for non-cooperating companies.

The enhancements had major implications for the way the Office carried out its year one mandate.

The Guidelines endorsed under the current 2014 Strategy are:

1. The International Finance Corporation (IFC) Performance Standards on Social and Environmental Sustainability (2012 version) for extractive projects with potential adverse social or environmental impacts^{Footnote 53}
2. The Voluntary Principles on Security and Human Rights for projects involving private or public security forces (2000)^{Footnote 54}
3. The Global Reporting Initiative for extractive sector CSR to enhance transparency and encourage market-based rewards for good CSR performance (2011 G3 reporting guidelines)^{Footnote 55}
4. The OECD Guidelines for Multinational Enterprises (2011 version)^{Footnote 56}
5. The United Nations Guiding Principles on Business and Human Rights (2011)
6. The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (2012, 2^nd edition)

Contact Us

The Office of the Extractive Sector CSR Counsellor
Government of Canada
111 Sussex Drive, R2-101
Ottawa, Ontario K1A OG2 Canada
Tel: +13432037631
Fax: +16139441130
Email: csr-counsellor@international.gc.ca
Visit: www.international.gc.ca/csr_counsellor-conseiller_rse