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Summative Evaluation of Canada's Corporate Social Responsibility Strategy For the Canadian International Extractive Sector - Final Report

September 2014

Abbreviations, Acronyms and Symbols

Acknowledgements

The Evaluation Division (ZIE), of the Office of the Inspector General at the Department of Foreign Affairs, Trade and Development (DFATD), would like to extend its appreciation to the employees of DFATD, both at Headquarters and missions abroad, including the CSR Unit in the International Trade Portfolio Division(BTA) of DFATD, the representatives of the Governance and Sustainable Economic Growth (YGH) Division of DFATD, and the Strategic Outreach and Partnerships Division of NRCan who were generous with their time and support. We would also like to express our gratitude to non-government organisations, foreign officials in Guatemala, Peru, Ghana and Senegal, as well as private companies and mining associations who agreed to participate in the evaluation of Canada’s Corporate Responsibility Strategy (CSR) for the Canadian International Extractive Sector. We also gratefully acknowledge the support and advice provided by the members of the Evaluation Advisory Committee (EAC) in reviewing the approach, findings and recommendations of this evaluation.

Executive Summary

Introduction

In March 2009, the Government of Canada (GoC) released “Building the Canadian Advantage: A Corporate Social Responsibility (CSR) Strategy for the Canadian International Extractive Sector” (the Strategy). The Strategy covers the mining, oil and gas sectors and reiterates the importance attributed by GoC to the voluntary application of corporate social responsibility standards in the practices of Canadian companies abroad.

The Strategy is intended to guide the GoC’s support to the Canadian extractive sector and in particular, to Canadian extractive sector companies working abroad, by enhancing their ability to manage social and environmental risks. To do this, it focusses on four key pillars/activities: 1) Host country capacity-building; 2) Promotion of international CSR guidelines; 3) Establishment of the Office of the Extractive Sector CSR Counsellor; and 4) Support to the development of the CSR Centre for Excellence (CfE). Two federal departments were involved in the development and implementation of the Strategy: the Department of Foreign Affairs, Trade and Development (DFATD) and Natural Resources Canada (NRCan).^{Footnote 1}

This summative evaluation of the Strategy was conducted in response to a requirement to review the Strategy at the end of the five-year period following its initial implementation. The evaluation was conducted by DFATD’s Evaluation Division. The purpose of the evaluation was to assess the relevance and performance of the Strategy and identify lessons learned regarding the efficiency, effectiveness and economy of its delivery.

Key Findings

Relevance

Overall, the rationale for the Strategy remains sound. Canadian extractive sector investments abroad continue to increase, with more companies becoming aware of CSR guidelines and standards, and starting to implement them in their operations abroad. Coverage, however, remains inconsistent: many companies have not integrated CSR into their corporate policies and governance structures. Large companies continue to be more engaged in CSR activities than smaller ones. Furthermore, CSR standards are more likely to be implemented in production activities than exploration. This is particularly true of junior mining companies that see CSR as less relevant to their business and challenging to implement mostly due to their lack of capacity to do so.

The nature of the challenges faced by extractive companies operating in developing countries is complex. Many developing countries endowed with natural resources, such as minerals and hydrocarbons, face challenges resulting from the lack institutional governance capacity to implement legislative and regulatory regimes to ensure that natural resource extraction is managed in an environmentally sustainable and socially responsible manner. Companies and representatives from industry associations confirmed that gaps in host country capacity create additional challenges for Canadian companies seeking to operate responsibly abroad in a stable and predictable business environment. They also noted the need for continued and expanded government support. Companies also seek guidance and support from Canada’s network of missions abroad in managing the social and environmental risks they face.

While the Strategy was intended to cover both mining and oil and gas extraction, it has proven more relevant to the mining sector. This is partially due to the structure of oil and gas ownership and the fact that the challenges faced by oil and gas companies are different from the operating challenges that most mining companies are facing. Oil and gas companies also tend to comply with the United States (U.S.) or other international industry standards rather than the CSR guidelines promoted by the Strategy.

The international extractive sector continues to merit attention with regard to CSR and an updated strategy is warranted. The concept of CSR and the context for responsible business practices has evolved since the release of the Strategy in 2009. The current context for host country capacity-building, social governance issues, engagement with communities and widely adopted CSR standards and guidelines has also evolved, and the CSR Strategy could benefit from changes to reflect this evolution.

The Strategy is fully aligned with the priorities of the GoC. The objective of creating a competitive advantage for companies by enhancing their ability to manage environmental, economic and social risks continues to align with Canada's foreign policy priorities.  This includes DFATD's role in promoting awareness of CSR standards among Canadian companies, helping to build the capacity of host governments to govern the extraction of their natural resources, and the active participation of DFATD and NRCan in international initiatives. The GoC has a key role to play in promoting stakeholder engagement and identifying the means to address evolving CSR challenges in the Canadian international extractive sector.

Performance – Achievement of Results

Overall, the Strategy has had a positive impact on how Canada is viewed, and has helped sustain Canada’s leadership role in the promotion of key CSR guidelines and standards. Expertise provided and projects undertaken by both NRCan and DFATD staff have increased Canada’s profile internationally and produced results at the country level. The Strategy has given the GoC a framework to convene a platform for multi-stakeholder dialogue on the importance of CSR in the Canadian international extractive sector. In particular, Canada’s missions abroad have successfully leveraged Canada’s image as an “honest broker” and a leader in the promotion of responsible business practices through the implementation of a range of initiatives involving industry and local stakeholders.

Pillar One – Host Country Capacity

Progress has been made by the GoC in creating an enabling environment for CSR through international information-sharing initiatives and bilateral cooperation projects in countries and regions with large Canadian investments in the extractive industries. Various capacity-building initiatives have increased the ability of host countries to manage the environmental and social impacts of mining. Canada’s contribution to the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) has supported the development and promotion of capacity-building tools and initiatives such as the Mining Policy Framework, a compendium of mining-related best practices.

Opportunities could be further seized by a better alignment of programming and capacity-building initiatives. Challenges related to the implementation of projects have been seen at the partner-country level. While many initiatives were undertaken, some Canadian interventions could have been better targeted to address local natural resource governance challenges and create an enabling environment conducive to CSR. For example, opportunities to better link development programming and commercial activities have not been fully explored. There has been insufficient coordination between trade efforts to promote CSR (albeit with limited funds) and development efforts to engage on broader issues of local government capacity to improve the investment climate. Lastly, Canada could have better explored and leveraged opportunities for cooperation and coordination with like-minded countries to implement capacity-building initiatives on a larger scale. This would have expanded the reach of Canada’s activities to more countries with significant Canadian extractive sector investments.

Pillar 2 – Promotion of CSR Guidelines

In terms of the promotion of CSR guidelines, extractive sector companies noted the potential value-added of advocacy initiatives in countries and regions with a history of poor mining practices, negative environmental impacts or social conflicts with local communities. The CSR-related activities implemented by missions and regional offices have been geared toward increased awareness of CSR standards among Canadian extractive sector companies and the improvement of Canada’s image as a promoter of responsible business practices. Results achieved included the creation of multi-stakeholder forums to promote dialogue and best practices sharing, as well as the provision of external expertise to governments to facilitate the development of new approaches to CSR.

Pillar 3 – Office of the Extractive Sector CSR Counsellor

The Office of the CSR Counsellor was established to fulfill two key roles: advisory and dispute resolution. The first role includes the provision of advice to stakeholders on the implementation of endorsed CSR performance guidelines.  While some progress has been made in raising Canadian companies’ awareness of the CSR performance guidelines promoted by GoC, the Counsellor’s engagement across Canada’s missions has been inconsistent.  There has also been confusion at missions about the role of the CSR Counsellor: some requests for advice and assistance by missions were acted upon, while others were deemed as falling “outside the Office’s mandate.”

With regard to the dispute resolution role, the Office was mandated to respond to requests from individuals, groups or communities affected by the activities of Canadian mining, oil and gas companies. For this purpose, the Office developed a five-step voluntary process to support dialogue and provide objectivity in the dispute resolution process between a company and the affected stakeholders or communities.  In the three years following its establishment, the Office has not succeeded in achieving a sufficient level of buy-in among key stakeholders and was perceived as not being a credible dispute resolution mechanism Input from both non-governmental organizations (NGOs) and companies indicated that Canada’s National Contact Point (NCP) for the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises (MNEs) is viewed as a more objective and independent institution with regard to handling disputes.  Some stakeholders suggested that the mandate of the CSR Counsellor be strengthened; a few even indicated that neither an office of this type nor an Ombudsman would be able to compel companies to participate in a non-judicial dispute resolution mechanism for the implementation of voluntary CSR standards.

Pillar 4 – Centre for Excellence

The rationale behind the development of The Centre for Excellence (CfE) in CSR still holds. The development of the CfE was a response to the identified need for “information, education programs, and tools” to enhance the capability of Canadian companies, particularly juniors, in incorporating CSR standards and practices in their operations; this need persists, particularly the need for detailed, country, community and operations-specific guidance.

While the GoC fulfilled its commitment to support the establishment of the CfE by providing financial support for a period of three years, unanticipated constraints on additional and continuous funding left the CfE with fewer resources than originally envisaged. Stakeholder interviews indicated that the CfE has not yet fully achieved its intended results. Some of the reasons cited were related to the internal structure and procedures of the Executive Committee, as well as to the struggle to secure funding beyond the initial support provided by the GoC.

The CfE has made some progress toward providing a web-based tool for communicating CSR best practices, but its full potential remains unexplored. Companies indicated that the website content would be more useful if its information was more detailed and if it offered concrete examples of CSR best practices.

Though not foreseen in the purpose behind its creation, an unintended result of the CfE was its enabling role of bringing together a broad range of extractive sector stakeholders for informal dialogue and greater mutual understanding. However, some NGOs withdrew when the GoC funding ended. According to Canadian companies, this curtailed the opportunity to continue generating a constructive dialogue. Given the multi-stakeholder nature of its Executive Committee, many believe that there continues to be untapped potential within the CfE.

Overall, the government fulfilled its commitment to provide initial funding for the CfE; however, the Centre has not yet reached its full potential as a tool and forum for high quality guidance on innovative and best CSR practices.

Performance – Efficiency and Effectiveness

The launch of Canada’s Strategy coincided with a period of fiscal restraint for the GoC. Consequently, the level of resources devoted to the Strategy, both human and financial, has not been sufficient to fully support coordinated, long-term initiatives or to ensure the achievement of longer-term and more sustainable results.  While the allocated CSR funds were used to generate positive results, the scale of initiatives often had to be reduced as the CSR Fund was consistently oversubscribed. Due to these financial limitations, missions found it difficult to plan strategically and undertake longer-term approaches to initiatives that could sustain Canada’s visibility and build stakeholder engagement. Missions are also often faced with competing priorities which diminishes the capacity of staff to engage more proactively with Canadian mining companies.

The lack of an implementation plan for the Strategy within DFATD has contributed to uneven levels of awareness, understanding and promotion of the Strategy and the related CSR standards across the mission network. Efforts to promote CSR by mission staff have not been consistent or sustained. Officers also reported limited access to training on the Strategy or CSR-related issues in the extractive sector.  Given the cross-cutting nature of the kinds of support a mission can undertake to promote CSR, many missions continue to view CSR as only a trade or only a political issue, indicating that trade, political and development initiatives remain uncoordinated.

Following the announcement of the Strategy, interdepartmental mechanisms were created to share information on CSR-related activities among the signatory departments (ex-DFAIT, ex-CIDA and NRCan). Implementation of the Strategy could, however, benefit from improved coordination, i.e. beyond sharing information only, between DFATD and other government departments.  The evaluation found evidence of limited coordination in the past between CIDA and DFAIT for capacity-building initiatives, due to different mandates and priorities.  Increasing coordination across development, trade and political agendas is important in addition to a strengthened relationship between DFATD and NRCan.

Creating a competitive advantage for Canadian companies was identified as the strategic outcome of the Strategy. However, the ability to assess the specific results achieved has been limited by the absence of clear objectives, expected results and performance indicators. The lack of a reporting framework did not allow for an on-going tracking and assessment of the progress with the implementation of the Strategy.

The evaluation found that there was some overlap between the mandates of the Office of the CSR Counsellor and Canada’s NCP, especially after the significant updates made in 2011 to the OECD Guidelines for MNEs, which set out the principles and standards for responsible business conduct.  Based on the level of resources allocated to the Counsellor’s Office and Canada’s NCP, the evaluation found that supporting a robust dispute resolution function with an increased caseload of CSR-related complaints or requests for assistance would be a challenge for both if their resources are not revised.

Recommendations

Recommendation #1: Update the Strategy, with particular attention to strengthening coordination among government departments and improving the alignment of Canada’s commerce, development and political initiatives.

Strengthening coordination will require: establishing a shared statement of objectives and clarification of the specific roles of DFATD and NRCan in the implementation of the Strategy; identifying long-term capacity-building initiatives that leverage the expertise of other government departments;  leveraging existing Canadian legal and regulatory mechanisms (e.g. Securities Regulators) to promote increased transparency in host countries and holding Canadian companies to account for their business practices abroad; and leveraging existing industry-led efforts to identify and share innovative CSR-related best practices with Canadian companies.

An improved alignment between Canada’s international commerce, development and political objectives related to CSR will be particularly critical for the achievement of results.  This will require a number of changes, including but not limited to:

• a renewed governance structure for the implementation of the Strategy that reflects the GoC’s international commerce, development and political objectives and activities;
• strengthened mandates of the CSR Working Group and the Interdepartmental CSR Committee to enable joint planning, broader promotion and implementation of CSR initiatives;
• identification of priority markets for the implementation of government-led CSR initiatives and transfer of CSR-related expertise;
• promotion of a coordinated whole-of-mission approach for the implementation of CSR-related initiatives; and,
• leveraging of synergies between the Office of the CSR Counsellor and Canada’s NCP to avoid duplication and enhance the effectiveness of these non-judicial CSR-related dispute resolution mechanisms. 

Recommendation #2: Elaborate a plan to guide the implementation of an updated Strategy as well as future activities and related resource allocation.

An action plan is needed to clearly identify methods to implement the updated Strategy.  This action plan should include the development of: coordinated CSR-related planning and/or programming among various departments that explores synergies based on their CSR-related expertise; an evergreen process for identifying CSR best practices, promotional tools and new guidelines and standards; and, a communication plan to increase awareness of the Strategy and any related updates among key staff at DFATD HQ, missions abroad and OGDs.. The development of external communication tools, including means to promote Canada’s CSR-related expertise and initiatives at major international forums (e.g. G-8 and G-20) would greatly benefit the implementation of the Strategy and increase Canada’s visibility as a strong promoter of responsible business practices.

Recommendation #3: Continue to develop tools and CSR-related training to support DFATD staff (HQ and missions) involved in the implementation of Canada’s Strategy.

The lack of adequate training among key DFATD staff is hampering their ability to effectively implement the Strategy.  A comprehensive CSR-related training curriculum for political, trade and development staff needs to be further developed. Mandatory training should be introduced to key staff posted in priority markets/countries with considerable Canadian extractive sector investments.  Strategic guidelines and tools should be further developed to support missions in accessing CSR-related resources and in developing longer-term plans for CSR-related activities.

Recommendation #4: Identify mechanisms for promoting regular engagement between the Government of Canada and other key stakeholders such as companies, industry associations and civil society groups to inform the continuous improvement and renewal of Canada’s Strategy.

The promotion of CSR requires active engagement of the GoC with a wide range of stakeholders.  Opportunities for effective stakeholder engagement should be explored to streamline efforts for the promotion of CSR guidelines and the dissemination of best practices and approaches to CSR among companies and stakeholders.  A range of stakeholder platforms currently exist, such as the Centre for Excellence, the Devonshire Initiative, as well as those offered by a number of industry associations (PDAC, MAC, etc.), The convening power of these existing platforms could increase the buy-in and support for the Strategy and enhance the credibility of GoC’s efforts to encourage responsible business practices for the extractive sector.

Recommendation #5: Identify more effective means to further support junior extractive sector companies in the implementation of CSR activities and initiatives that correspond to their needs, operational contexts and investment challenges.

The main gaps in terms of CSR application at the company level are seen with junior extractive sector firms. A wide range of stakeholders indicated that there was a recognized need to develop and promote CSR tools and specific CSR-related activities for junior companies. These may require additional support to mission staff in identifying and promoting CSR best practices that are relevant to the operational challenges faced by junior companies in a specific country or region.  

DFATD should also consider leveraging existing Canadian expertise (e.g. NRCan), as well as international business development mechanisms and tools, to create incentives for junior mining companies and encourage the implementation of CSR guidelines in their exploration practices.  Industry associations such as PDAC and MAC can also play a key role here.

1.0 Introduction

The Evaluation Division (ZIE) at the Department of Foreign Affairs, Trade and Development (DFATD) is housed within the Office of the Inspector General (ZID) and is mandated by the Treasury Board Secretariat (TBS), through its 2009 Policy on Evaluation, to conduct evaluations of all direct program spending of the Department including grants and contributions programs. ZIE reports to the Departmental Evaluation Committee (DEC) on a quarterly basis, which is chaired by the Deputy Minister of Foreign Affairs.

The evaluation of the GoC’s Strategy was conducted as part of the Five-Year Departmental Evaluation Plan. This evaluation responds to the requirement to review the Strategy at the end of a five-year period following its initial implementation. The target audience for the evaluation includes Senior Management of two federal departments implicated in the development and implementation of the Strategy: DFATD and Natural Resources Canada (NRCan).

It should be noted that in June 2013, the Department of Foreign Affairs and International Trade (DFAIT) and the Canadian International Development Agency (CIDA) were amalgamated into the Department of Foreign Affairs, Trade and Development (DFATD). Since this evaluation covers a Strategy that was developed prior to the creation of the new department, this document refers to DFAIT and CIDA when discussing activities and commitments made prior to the amalgamation.

2.0 Background And Strategy

2.1 Strategy Overview and Development

The GoC defines CSR as the voluntary activities that companies undertake in order to operate in an economic, social and environmentally sustainable manner. In March 2009, the GoC released the CSR Strategy to assist Canadian extractive sector companies working abroad by enhancing their ability to manage social and environmental risks. The Strategy covered the Canadian mining, oil and gas sectors abroad.

The Strategy reiterated the importance attributed by the GoC to the voluntary application of corporate social responsibility standards in the practices of Canadian mining, oil and gas companies operating abroad.  While the Strategy was created around eight core areas, much of the focus has been centred on four elements, referred to as “the four pillars” of the Strategy:

• 1. Host Country Capacity-building - Support initiatives to enhance the capacities of developing countries to manage the development of minerals and oil and gas and to benefit from these resources to reduce poverty.
• 2. Promotion of CSR Guidelines- Promote, primarily through DFAIT and NRCan, widely-recognized international CSR performance guidelines with Canadian extractive companies operating abroad:
  • Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises;
  • International Finance Corporation (IFC) Performance Standards on Environmental and Social Sustainability;
  • Voluntary Principles on Security and Human Rights; and
  • Global Reporting Initiative (GRI) Guidelines.
• 3. Office of the Extractive Sector CSR Counsellor - Set up the Office of the Extractive Sector CSR Counsellor to assist stakeholders in the resolution of CSR issues pertaining to the activities of the Canadian extractive sector companies abroad.
• 4. CSR Centre for Excellence - Support the development of the CSR Centre for Excellence (CfE) to provide a forum through which all stakeholders, within both industry and government, can access timely, high-quality CSR tools and information.

The other four elements of the 2009 Strategy are:

• Transparency and Disclosure – recognizing and promoting transparency and disclosure as key to the success of CSR activities;
• Financial Incentives – describes responsible investment, including through the Canada Pension Plan;
• Legal Incentives – examining the possibility of extending the reach of the Corruption of Foreign Public Official Act; and
• Continuous Improvement and Stakeholder Involvement – cites the need for close co-operation with stakeholders for successful implementation of the Strategy.

The development of the Strategy was influenced by recommendations made in a 2005 report of the former Standing Committee on Foreign Affairs and International Trade (SCFAIT) entitled “Mining in Developing Countries – Corporate Social Responsibility.”  The SCFAIT report called on government to strengthen or develop new mechanisms for monitoring the activities of Canadian mining companies in developing countries and for dealing with allegations of socially and environmentally irresponsible conduct and human rights violations.

In response, the GoC held a number of public National Roundtables in 2006-2007 with Canadian companies, industry associations, civil society and non-governmental organizations (NGOs) on issues related to the international extractive sector. These Roundtables examined how the GoC could promote responsible business practices by Canadian companies in the international extractive sector.  The Roundtables resulted in a number of recommendations, which were used to inform the development of the Strategy.

2.2 Rationale for the Strategy

Over the past decade, Canada has been a central player in international extractive industries (mining and oil and gas), with Canadian financial markets in Toronto and Vancouver representing the world’s largest source of equity capital for mining companies.  In March 2009, when the Strategy was announced, over 75% of the world’s exploration and mining companies were headquartered in Canada, operating in over 100 countries around the world.  Canadian extractive sector companies continue their search for new resources in developing countries. As of 2013, 52% of the world’s public mining companies were Canadian with considerable mining and investment activities in Africa and Latin America.

The complex nature of the challenges faced by companies operating in developing countries, as well as the scale of Canadian extractive sector presence and investments in these countries are some of the underlying reasons for the GoC to commit to provide support to these companies by developing the CSR Strategy.  The Strategy recognized that, while most Canadian companies were committed to the highest ethical, environmental and social standards, those lacking such commitment could cause harm to the communities abroad and undermine the competitive position of other Canadian companies.

The effective management of a country’s natural resources is key to fostering economic growth. Developing countries with a booming extractive sector are becoming increasingly aware of the potential economic and social contributions that accompany responsible and sustainable extractive resources development. These countries are increasingly looking at ways to tap into the enormous potential to stimulate sustainable economic growth and bring people out of poverty by actively seeking foreign direct investment in the extractive sector. There are still instances, however, of negative environmental, social and economic impacts of extractive sector resource development, including operations of some Canadian companies. In addition, developing countries face considerable capacity challenges in regulating the extractive sector and enforcing environmental requirements, which in some jurisdictions is further complicated by lack of transparency and/or high levels of corruption.

From an environmental perspective, both mining and oil and gas activities can have significant, long-term impacts on areas surrounding the projects. For example, both activities require substantial amounts of water, which can compete with local agricultural activities and create tensions with communities with scarce water resources.  From an economic perspective, extractive sector projects have often failed to generate stable, long-term employment beyond the exploration stage due to the technical requirements of the industry. Local stakeholders often feel that their natural resources are being exploited with little or no economic benefits to the community.

In this context, the GoC developed the Strategy to foster and promote sustainable development and responsible business practices for the international extractive sector, and specifically for Canadian companies operating abroad. By incorporating and promoting internationally-recognised CSR performance guidelines and standards, the Strategy aimed at enhancing companies’ ability to manage social and environmental risks while also contributing to local capacity for natural resource management and prosperity in countries where Canadian extractive sector companies operate.

2.3 Strategy Activity Pillars and Components

As mentioned in the previous section, the Strategy was created around eight core areas; however, the focus was on the “four pillars,” which also form much of the foundation for this evaluation.

Pillar 1: Host Country Capacity-Building

Many developing countries endowed with natural resources, such as minerals, metals and hydrocarbons, face governance and institutional capacity challenges in implementing legislative and regulatory regimes to help ensure natural resource extraction is managed in an environmentally sustainable and socially responsible manner. The lack of sufficient knowledge and experience at the local government level with handling and managing the rights of indigenous communities and with long-term development planning have been identified as key areas of concern for the effective implementation of CSR by the extractive sector. Regional and local governments often lack the capacity to manage revenues, rents and royalties from natural resources, which may further exacerbate regional inequalities and increase the likelihood of conflict.

Through its Strategy, the GoC pledged to support initiatives that enhance the capacities of developing countries to manage the development of mining and oil and gas resources and to benefit from these resources to reduce poverty. Former CIDA and NRCan were envisaged as the main contributors to this pillar.

CIDA committed to assist in building and modernizing the governance regimes in developing countries and to ensure that natural resources were managed in a technically- and environmentally-sound manner. The initiatives undertaken were driven by a desire to foster sustainable development in the countries and reduce poverty.  Through the Strategy, CIDA committed to establishing an internal focal point with expertise in extractive sector development. It also committed to working with like-minded donors to advance more responsible and sustainable approaches to natural resource governance.

Based on its experience in providing technical assistance for mining, oil and gas in various countries and support to multi-government mining organizations, NRCan committed to continue supporting initiatives aimed at enhancing host country extractive sector development. NRCan provides technical information and advice to countries, including members of the IGF, to facilitate the creation of mining laws and regulatory frameworks. Through forums like the IGF, Canada shares its best practices for the sustainable management and development of the mining sector.

Since revenue transparency was considered a key aspect of improved governance, Canada became a strong supporter of the Extractive Industries Transparency Initiative (EITI) – an initiative led by a coalition of governments which seeks to increase the transparency and accountability in the management of extractive sector revenues.  Canada announced its official support for the EITI in 2007, and made an initial contribution of $1,150,000 over a period of four years dedicated to capacity-building initiatives in EITI candidate countries. In October 2012, the Prime Minister announced $20 million over four years in new support for the EITI and Extractive Industries Technical Advisory Facility. The purpose is to help developing countries manage their natural resource industries in a responsible and transparent manner. Canada's participation in the EITI is led by NRCan in collaboration with DFATD.

Pillar 2: Promotion of CSR Guidelines

The Strategy reiterated the GoC’s support for initiatives related to the promotion of CSR among Canadian extractive sector companies operating abroad, including: the provision of CSR-related guidance to the Canadian business community through Canadian embassies and missions abroad; the strengthening of the NCP; and the development of an online training tool and a CSR Fund to assist missions abroad in implementing CSR-based activities and events.

To build upon these efforts, Canada endorsed and promoted - through the Strategy - four internationally recognized CSR guidelines and standards to Canadian extractive sector companies operating abroad, as outlined in Section 2.1.  Promotion of CSR guidelines has primarily been undertaken at national industry association events and through advisory services provided by trade commissioners (TCs) posted throughout Canada's network of missions abroad.

Pillar 3: Office of the Extractive Sector CSR Counsellor

Unresolved disputes can directly impact businesses through expensive project delays, damaged reputations, conflict management costs, investment uncertainty or the loss of investment capital.  Recognizing the need to support extractive sector companies in the resolution of disputes, the GoC established the Office of the Extractive Sector CSR Counsellor in 2009.

The mandate of the CSR Counsellor is two-fold: (i) review the CSR practices of Canadian extractive sector companies operating abroad and; (ii) advise stakeholders on the implementation of the endorsed CSR performance guidelines and dispute reduction and prevention.

The Counsellor responds to requests for review from individuals, groups or communities who might have been negatively affected by the actions of a Canadian extractive sector company in relation to the CSR guidelines promoted by the Strategy, and specifically:

• The Voluntary Principles for Human Rights;
• The Global Reporting Initiative; or
• The IFC Performance Standards.

The CSR Counsellor’s Office developed a problem-solving mechanism, called the Review Process, which emphasizes dialogue and constructive dispute resolution. Canadian mining and oil and gas companies who believe they are the subject of unfounded allegations concerning their overseas activities may also bring requests to the CSR Counsellor.  The Review Process consists of five stages: an initial assessment, informal mediation, fact-finding, providing access to formal mediation and reporting.  The CSR Counsellor’s Office also includes promotion of the OECD Guidelines for MNEs, while Canada’s NCP is responsible for dispute resolution with regard to the OECD Guidelines for MNEs.

Pillar 4: CSR Centre for Excellence

While the primary responsibility for implementing responsible business practices rests with companies, the Strategy recognizes that companies need additional support to better manage the social and environmental risks associated with their operations, including tools, education and information on best practices.

To help improve access to CSR tools and information, the GoC provided funds to support the development of a CSR Centre for Excellence within the Canadian Institute of Mining, Metallurgy and Petroleum (CIM). The CfE was expected to build the capacity of Canadian extractive sector companies operating abroad to implement voluntary CSR Standards and manage risks by developing and disseminating high-quality CSR information, training and tools through a web site. The purpose was to create an inventory of CSR contacts for Canadian companies, share best practices and support the development of a "CSR community of practice."

As part of the Strategy, the Government also committed to promote a number of specific initiatives under the following thematic components:

Transparency and Disclosure

Former CIDA committed to strengthen the implementation of the Strategy in Canada’s official development assistance programs by assessing the procedures and guidelines for projects involving Canadian private sector partners. Export Development Canada (EDC), for example, heightened its disclosure requirements and the exercise of due diligence for investment projects in countries with higher potential for human rights violations.

Financial Incentives

In addition to supporting CSR through the consistent implementation of IFC Performance Standards at the World Bank and the regional development banks, the GoC indicated it would encourage the World Bank to undertake analytical work focussed on the positive contributions of human rights protection to the development process.

Legal Incentives

Canada is a State Party to the OECD Convention on Combating Bribery of Officials in International Business Transactions. Through the Strategy, the GoC committed to examine the possibility of expanding the application of the offence of bribing a foreign public official in Section 3 of the Corruption of Foreign Public Officials Act (CFPOA) on the basis of the active nationality principle of jurisdiction.

Continuous Improvement and Stakeholder Involvement

In addition to identifying the need for closer cooperation with all stakeholders, the GoC noted the importance of promoting the implementation of key elements of the Strategy and conducting further analysis on how best to enhance the natural resource governance capacity of developing countries. Continuous feedback and validation from users was deemed necessary to ensure that the tools developed by the CSR Centre for Excellence are useful. A commitment was also made to review the overall effectiveness of the Strategy five years after initial implementation.

2.4 CSR Clients and Beneficiaries

The Strategy is largely directed at Canadian extractive sector companies with operations abroad. The Strategy aims to benefit these companies by assisting them in managing risks associated with their investments and improving their competitiveness in the global marketplace. By promoting best practices, preventing and resolving disputes (through its Counsellor Office), and helping to create a transparent and predictable environment for investment, the Strategy endeavours to help brand Canada as a partner of choice for extractive sector investments abroad.

Local governments in developing countries where Canadian companies are operating are among the intended beneficiaries of the Strategy. The Strategy promotes responsible business practices by extractive sector companies, and it seeks to build the capacity of host governments to regulate and oversee extractive sector operations to help ensure that the benefits of these operations are distributed more equitably. Such initiatives help mitigate potential negative impacts of extractive sector investment while ensuring that investment contributes to sustainable development and poverty reduction.

The Strategy was also intended to guide departments and staff, particularly trade commissioners in the field, in raising awareness about CSR and providing advice to Canadian companies seeking to invest abroad on the need to adhere to international CSR guidelines and standards. Canadian missions abroad are using the Strategy in identifying government-endorsed CSR tools and guidelines and in planning and organising events and initiatives that facilitate dialogue and sharing of best practices between companies and local stakeholders.

2.5 Governance of the Strategy

Following the launch of the Strategy, a number of offices, committees and working groups were created to coordinate the activities of DFATD and NRCan, and to share relevant information with other government departments (OGDs) whose mandates and activities are relevant to CSR, such as:

• Interdepartmental Strategy Working Group: An interdepartmental Working Group (WG), chaired at the DFATD Director General (DG) level (Trade Commissioner Service - Operations - BTD) and co-chaired by NRCan at the DG level, monitors the implementation of CSR-related activities. This WG, with representatives from DFATD (Trade and Development) and NRCan, meets several times per year to share information and coordinate initiatives undertaken by these departments.

• Interdepartmental CSR Committee: This Committee is chaired at the DG level (DFATD/BTD) and co-chaired by a representative from NRCan. It is composed of representatives from 10 OGDs including Environment Canada (EC), Industry Canada (IC), Justice Canada, Employment and Social Development Canada (ESDC) (the former Human Resources and Skills Development Canada), Export Development Corporation (EDC) and International Development Research Centre (IDRC). The Interdepartmental Committee is the primary vehicle for sharing information among GoC departments on CSR-related activities and supports the GoC's whole-of-government approach to the promotion of CSR.

• Office of the Extractive Sector CSR Counsellor: The Extractive Sector CSR Counsellor reports to the Minister of International Trade.

• CSR Centre for Excellence: The CSR Centre for Excellence has a multi-stakeholder executive committee, which includes senior representatives from industry, non-governmental organizations and civil society organizations. Representatives of the GoC participated in the executive committee as observers.

• Canada’s NCP: Canada’s NCP is comprised of an Interdepartmental Committee chaired at the DG level at DFATD (BTD) and vice-chaired by a representative from NRCan. NCP members include representatives from seven departments: DFATD, NRCan, Environment Canada, Finance Canada, Employment and Social Development Canada, Industry Canada, and Aboriginal Affairs and Northern Development Canada (AANDC). Canada’s NCP Interdepartmental Committee is expected to meet at least twice annually or as considered appropriate and necessary by the Chairperson, and may create Working Groups for specific situations.

2.6 Resources

The Strategy has been implemented through the allocation of existing departmental funds (CIDA and DFAIT) and related program funds.

DFATD – Trade Resources

Missions, regional offices and HQ divisions can apply for funding from the CSR Fund, which is a portion of the Client Service Fund (CSF) Envelope, to organize CSR-related activities. Over the past five years, DFATD has allocated on average $250,000 annually for CSR activities related to the extractive sector and used by Canada's missions abroad.

DFATD also allocates $200,000 annually to cover the operational costs of the Office of the CSR Counsellor.

The Global Peace and Security Fund (under the Stabilisation and Reconstruction Task Force - START Program) approved a contribution agreement for $150,000 over three years (FY2009-2010 to FY2011-2012) to support the creation of the CSR Centre for Excellence.

DFATD has also allocated a total of US$71,600 in annual membership fees to the Voluntary Principles on Security and Human Rights.  Finally, $114,800 was allocated to Canada’s NCP between FY2012-2013 and FY2013-2014 to support the mediation of a complaint pertaining to the extractive sector.

Within DFATD, the implementation of the Strategy was delegated to the International Trade Portfolio and Responsible Business Practice Division (BTA), composed of one deputy director and five officers. The CSR unit in BTA, has historically been understaffed (3 to 5 FTEs) and only in FY2013-2014, the staff complement was increased to six FTEs. The unit is responsible for the provision of policy and operational support to trade commissioners and other GoC officials, at HQ and in the field. This unit engages with international stakeholders to contribute to the ongoing development of international CSR Standards, houses Canada’s NCP Secretariat and provides operational support to the Office of the CSR Counsellor.

Other DFATD divisions involved in the promotion and implementation of CSR standards are the Sector Practices Division (BBI), the Human Rights and Governance Policy Division (MIH), and some of the geographic branches and divisions.

DFATD – Development Resources

The former CIDA provided direct program funding to the OECD Secretariat for the MNE Guidelines to assist in promoting the implementation of the guidelines in developing countries, including providing assistance for the establishment of local NCPs.  Between 2009 and 2014, approximately $280 million was allocated for multi-year programming pertaining to natural resource governance, which sought to build governance capacity within partner countries, promote responsible management of the extractive sector and increase the ability of developing countries to benefit from natural resource extraction.   The Natural Resource Governance team is composed of four full-time equivalents (FTEs), and there are currently twelve countries with active programming in the extractive sector.  These are now the responsibility of the DFATD Development Section.

NRCan Resources

Within NRCan, a total of 2.5 FTEs contribute to the implementation of the Strategy through the promotion of CSR-related events and the facilitation of knowledge transfer with other governments through participation in the IGF. Several officers in NRCan's corporate branch implement other activities pertaining to the Strategy, including promotion of the EITI and development of a mandatory financial reporting regime for extractive sector companies.

3.0 Evaluation Methodology

3.1 Key Considerations

The Strategy outlines methods for the GoC to promote the implementation of voluntary CSR activities to help companies improve the sustainability of their investments. This means that the CSR performance of a given company or number of companies does not reflect the extent to which the expected results of the Strategy have been achieved.

The lack of a fully articulated implementation plan and performance measurement framework for the Strategy complicated the assessment of the extent to which the Strategy has achieved its expected results. In the absence of such detailed information, the evaluation team developed a performance framework based on the commitments outlined in the Strategy to guide the assessment of achieved results.

The Strategy is an ongoing initiative that is not subject to renewal requirements. This evaluation responded to a requirement that the implementation of the Strategy be reviewed after a period of five years to identify gaps or needs for improvement. Therefore, the evaluation aimed at identifying whether there is a  need for the Strategy to be updated and reflect any changes in the operational  context for Canadian extractive sector companies working abroad and assessing the extent to which these companies continue to require support from the GoC in managing environmental, economic and social risks associated with their practices.

3.2 Evaluation Objectives and Scope

The goal of this evaluation was to provide Senior Management of DFATD and NRCan with a neutral and evidence-based assessment of the relevance and performance of the Strategy, as well as the effectiveness of its implementation, covering the period from the launch of the Strategy in 2009 to February 2014. Using a systematic data collection process, the evaluation reviewed stakeholders’ awareness of the Strategy and its relevance to the challenges faced by Canadian extractive sector companies operating abroad. The evaluation assessed implemented activities and results achieved under the Strategy, as well as the extent to which the established governance structures (including the whole-of-government approach to CSR), have contributed to these results. Based on the evaluation findings, recommendations were identified to guide future implementation and renewal of the Strategy.

The specific objectives of the evaluation were to:

• 1. Evaluate the extent to which the Strategy continues to respond to the needs of Canadian companies and other stakeholders and continues to be aligned with  GoC foreign policy priorities and the strategic outcomes of DFATD and NRCan;
• 2. Evaluate the performance of the Strategy as a whole, and the results achieved under each of the Strategy’s four pillars;
• 3. Determine the extent to which the whole-of-government implementation of the Strategy has been efficient, effective and adequately resourced; and
• 4. Derive lessons learned and best practices that could inform future initiatives or contribute to the review and update of the Strategy.

The evaluation issues covered under this evaluation conform to the 2009 Treasury Board Policy on Evaluation and Directive on the Evaluation Function, focussing on assessing the relevance and performance of the Strategy.

Relevance issues addressed the consistency of the Strategy with Departmental and GoC priorities and the extent to which it realistically responds to a continued need of Canadian companies.

• Issue 1: Continued Need for the Strategy - Does the Strategy continue to address a demonstrable need of the Canadian international extractive sector and does it respond to the needs of Canadian companies operating overseas?
• Issue 2: Alignment with Government Priorities - To what extent is the Strategy aligned with federal government priorities and DFATD’s strategic outcomes?
• Issue 3: Alignment with Federal Roles and Responsibilities - To what extent is the Strategy aligned with the roles and responsibilities of the federal government?

Performance issues focussed on the following areas:

• Issue 4: Achievement of Expected Outcomes - To what extent have the expected outcomes of the Strategy been achieved?
• Issue 5: Demonstration of Efficiency and Economy - Are the most appropriate and efficient means used to achieve expected results? Could the same results be achieved with fewer resources?

The conduct of the evaluation was guided by an Evaluation Advisory Committee (EAC) comprised of representatives from DFATD, NRCan and other major stakeholder organizations.  The EAC reviewed the Work Plan for the evaluation and the preliminary findings.

3.3 Evaluation Matrix

An evaluation matrix was designed to help guide and facilitate the evaluation process, report on the evaluation findings and identify recommendations.  The matrix also set out the evaluation issues, questions, methods of collection and anticipated data sources.

3.4 Logic Framework

In the absence of a performance measurement framework and performance data, the evaluation team developed a logic framework that highlighted the expected results from the Strategy.  This is shown in the following graphic.  The logic framework was used as the basis for triangulating the available evidence:  interviews with key stakeholders, data analysis, activity proposals and reports, and relevant literature to assess results.

Evaluation Framework: How Achievement of Expected Results was Assessed

Enabling The Creation Of A Supportive Environment To Enhance The Competitive Advantage of Canadian Companies

Contribution To Canada's Image Abroad

Increased Awareness of CSR Performance Guidelines And Standards Among Canadian Companies

Host Country Capacity-Building

• Capacity building assistance in host countries
• Mechanisms to transfer Canadian knowledge abroad
• Contributions to natural resource governance capacity

Promotion of CSR Guidelines

• Stakeholder participation in initiatives to promote CSR standards and guidelines
• Contribution to the ongoing development of international standards
• Awareness of GoC expectations re: CSR performance

Office of the CSR Counsellor

• Creation of a credible, independent dispute resolution forum
• Evidence of targeted and effective promotional activities
• Use of a dispute resolution forum by stakeholders

CSR Centre for Excellence

• Development of a CFE, housed in an existing organisation outside the federal government
• Effective multi-stakeholder forum for sharing of best practices
• Value-added to Canadian investments abroad

3.4 Data Collection Methods

The evaluation triangulated evidence from multiple lines of inquiry, including both quantitative and qualitative information, to identify evidence-based evaluation findings.  The systematic methodology consisted of a number of elements.

File and Document Review

Literature related to CSR and other pertinent documents were reviewed to examine the relevance and continued need for the Strategy.  These documents included industry and civil society reports on emerging trends for CSR in the international extractive sector and natural resource governance challenges identified in host countries. In addition, the evaluation team reviewed corporate documents including documents regarding the Strategy development, press releases and reports on priorities to assess the extent to which the Strategy continues to be aligned with the GoC's foreign policy priorities as well as departmental mandates and objectives.

Key Informant Interviews in Canada

In-person and telephone interviews were conducted with 118 key informants who were either knowledgeable of CSR-related challenges faced by Canada’s international extractive sector or who were/are directly involved in the implementation of the Strategy. This included: staff from DFATD and NRCan; representatives of other government departments; representatives of the Office of the Extractive Sector Counsellor and the CSR Centre for Excellence; civil society and NGOs; consultants; Canadian extractive sector companies; and representatives from industry associations.  Interviewees were asked to provide feedback on the current context for CSR in the international extractive sector, challenges faced by Canadian companies, rationale for the development of the Strategy and progress made in its implementation.

Field Visits

Four field visits were conducted in Guatemala, Peru, Ghana and Senegal in order to conduct an in-depth analysis of the CSR context in countries with substantial Canadian mining assets abroad (CMAAs) and/or extractive sector potential. These visits allowed the evaluators to meet with local civil society actors, community stakeholders, representatives from host governments, Canadian companies and staff at missions to gain an in-depth understanding of the concerns of local stakeholders as well as challenges faced by both Canadian extractive sector companies and host governments. Field visit locations were selected in consultation with the Evaluation Advisory Committee members.

Data Review

The evaluation team conducted a review of data from DFATD’s Trade Commissioner Reporting System (TRIO), the Commercial/Economic Program (CEP) and Mission Advocacy Activity Tracker (MAAT) to assess the type and number of events and initiatives implemented by missions abroad using funding from the CSR fund in support of the Strategy. This information was triangulated with data from interviews with mission staff to examine how CSR-related events and initiatives are planned and implemented by missions abroad and identify both the results achieved and ongoing implementation challenges.

Portfolio Review / Meta-Synthesis of Existing Evaluation Information

The Development Evaluation Division (former CIDA) prepared a portfolio review of the 68 former-CIDA projects pertaining to Natural Resource Governance from 2008 to 2013. This review contributed to an assessment of the relevance and performance of the first pillar of the Strategy, including the extent to which the Strategy continues to respond to the needs of developing countries and is aligned with DFATD’s poverty reduction strategies.

Country Comparative Analysis

The evaluation conducted a review of initiatives implemented by like-minded countries to promote responsible business practices in the international extractive sector in order to identify best practices as well as additional opportunities for engagement on this issue by the GoC. In particular, the evaluation team examined initiatives implemented by the governments of Australia, Germany, Norway as well as the NCPs of Norway, the United Kingdom and the Netherlands.

3.5 Limitations to the Methodology

Due to the lack of a performance measurement framework and performance data regarding the implementation of the Strategy, the evaluation team was limited in the extent to which it could incorporate quantitative analyses of the CSR activities implemented by missions abroad. Furthermore, the availability of performance data was limited for some projects and initiatives implemented under Pillar 1 of the Strategy due to the recent implementation of certain projects and a lack of established performance measurement practices among some ongoing initiatives. To mitigate this limitation, the evaluation team constructed a logic framework based on the overall purpose of the Strategy and the activities under each pillar to assess the extent to which intended results have been achieved.

Site visits were used to gain a better understanding of the local context in countries with significant Canadian extractive sector investments as well as the impact of Canada's CSR promotion activities in key markets abroad. However, the evaluation team was limited in the number of site visits that could be undertaken.  This meant that not all regions with a significant presence of Canadian extractive sector companies could be examined in-depth.

To address these issues, purposive sampling was used to identify two countries in both Latin America and Africa where Canadian companies are active, where there have been notable CSR challenges and where Canada's missions abroad are actively engaged in promoting CSR in the extractive sector. To supplement this, telephone interviews were conducted with trade, political and development staff across the mission network to obtain information about the local context for responsible business practice, the continued need to support Canadian companies in managing risks associated with their operations and the CSR activities implemented to support Canadian companies. This data was triangulated with industry reports on the nature of CSR-related challenges faced by companies operating in various regions and countries.

4.0 Evaluation Findings

4.1 Relevance Issue 1: Continued Need for the Strategy

Finding #1: Canada's extractive industry investments abroad continue to be significant.  Despite increased awareness and adherence to key CSR guidelines and standards, the ability of Canadian extractive sector companies to fully integrate CSR into their operations abroad and manage social and environmental risks has been uneven.

Two of the key assumptions underlying the development of a Strategy were the fact that Canada was a major player in the international extractive sector and that the sector faced unique challenges when operating in developing countries.  Five years after the initial implementation of the Strategy, both of these assumptions remain valid.

Canadian companies have a significant and growing presence in the international mining sector. Canadian mining assets abroad (CMAAs) totalled $148.7 billion in 2012, representing a 17.7% increase over CMAAs in 2010 as shown on Table 1.  Furthermore, CMAAs accounted for roughly two-thirds of the total mining assets held by Canadian companies during the period between 2010 and 2012.

Source:           NRCan (2014) "Information Bulletin: Canadian Mining Assets - December 2013"

Canadian mining companies are active around the world as shown on Table 2.  The concentration, however, is in the Americas and Africa.

Source:           NRCan (2014)

Canada has been recognized as a leader in mining finance and exploration and is home to nearly 50% of the world's large exploration companies.^{Footnote 2} In 2010, the exploration budgets of Canadian companies outpaced all other major global competitors, including Australia and the United States, with exploration activities primarily centering upon markets in the Americas, including Mexico, Chile and Peru.^{Footnote 3} Canada continued to be the world leader in exploration budgets in 2012 despite recent challenges faced by junior companies in raising investment capital.^{Footnote 4}

Similar statistics are not available for Canada's oil and gas industry, although the global presence of Canadian firms is clear. Industry stakeholders state that the lack of statistics is partly due to the fact that international operations of oil and gas companies are often implemented by independent local subsidiaries of parent companies.  However, a number of large Canadian companies are known to be active internationally, including Apache Corporation, Niko Resources, Pacific Rubiales, Talisman Energy and Gran Tierra Energy.

Results shown on Table 3 of a 2013 CSR Survey^{Footnote 5} of Canadian extractive sector companies suggests that Canadian extractive sector companies active internationally have become increasingly aware of the CSR guidelines identified in the Strategy.  More companies are now implementing CSR activities in their operations abroad. However, the survey also demonstrates that there is a continued need to promote both awareness and implementation of international CSR standards among companies to improve their ability to handle social and environmental risks linked to their operations.

Source:           Price Waterhouse Cooper. 2014. Survey of Corporate Social Responsibility in the Canadian Extractive Sector.

While there is a need for increased CSR engagement among extractive sector companies generally, large companies continue to be more likely to engage in CSR activities than smaller companies.  Furthermore, CSR activities are more likely to be implemented by companies engaged in production activities versus exploration activities.^{Footnote 6}

This finding was corroborated by feedback from several Canadian companies, representatives of industry associations and trade commissioners posted at Canada's missions in Latin America and Africa.  In particular, they noted that junior mining and exploration companies tend to consist of small teams and often lack the financial resources to support robust CSR programs. Some interlocutors added that junior companies are less likely to see the value of CSR to their operations, which are often focussed on "flipping" projects to larger companies for short-term profit.

Lack of awareness among junior mining and exploration companies about CSR practices and their importance even at the early stages of a project has the potential to amplify the challenges faced by larger Canadian companies during the development and operational stages. A small exploration or production company may fail to establish a strong or favourable relationship with the surrounding community, or may entirely disregard CSR principles. As a result, larger companies that subsequently acquire the project may face "legacy" conflicts that can potentially threaten future operations and increase costs. This reiterates the need for raising awareness of CSR standards and guidelines among Canadian companies and the role that the CSR Strategy can play in filling in this gap.

Many stakeholders reported that the management of social risk abroad must be responsive to the particular risks and challenges of each investment site. They questioned whether it is appropriate to assume that standards and practices that are applied in Canada could equally be applicable in operations abroad. The endorsement and use of international standards as part of a company’s policy and the integration of CSR considerations into its corporate governance were cited as helpful for ensuring that site-specific CSR practices align with both corporate and international standards and best practices.

DFATD staff and Canadian companies noted that, without corporate accountability structures for CSR, the implementation of activities is heavily dependent on the endorsement and expertise of local management and staff, which may lead to inconsistencies across operations. They reiterated the need for better promotion of CSR standards and guidelines in the field and based on the country-specific issues through Canada`s missions abroad.

Finding #2: Companies continue to seek guidance and support from the Government of Canada in managing the risks of operating in complex and challenging environments.  This is partially a reflection of the changing nature of the challenges faced by oil and gas and mining companies operating in developing countries.

Many companies continue to seek guidance and support from Canada's network of missions abroad in managing the social and environmental risks associated with their investments. Companies reported that the operational challenges for which they seek assistance from embassies are in managing the social risk associated with their activities. Industry representatives noted that mission staff are a valuable source of information about the social context surrounding an investment, providing information about previous conflicts with communities, relevant political challenges and a directory of local stakeholders such as NGOs, civil society groups and community leaders. Some industry representatives reported that the ability of trade commissioners to provide this kind of information varied from country to country. Alternatively, trade commissioners abroad noted that some companies, often junior mining and exploration companies, tend not to contact the embassy unless they perceive a potential problem or have encountered significant issues with the local government or with local communities.

Canada’s missions abroad are often seen by companies as an "honest broker" that can convene different stakeholders to discuss complex CSR challenges such as human rights, consultation with indigenous groups, and CSR best practices. Events held by missions provide an opportunity for companies and community groups to discuss these challenges openly, communicate expectations and come to a common understanding of emerging challenges. Trade commissioners report that these events are well attended by both major companies and local stakeholders, but there is often limited participation from junior companies who could most benefit from these events.  

Since the launch of the 2009 CSR Strategy, new internationally recognized standards have emerged to help companies manage social, economic and environmental risks through responsible business practices.  These standards are facilitating a shift towards fuller integration of CSR into day to day operations.  For example, evidence from field visits and interviews with Canadian companies demonstrate that companies are increasingly looking to more recently developed standards for guidance in engaging with communities and the development of local supply chains.   An often quoted standard by some partners abroad was the ISO 26000 on social responsibility, as well as the Guiding Principles on Business and Human Rights.

Stakeholders from industry also noted that the CSR standards and tools specifically mentioned in the Strategy do not entirely address the specific challenges faced by junior mining companies.  Even though these standards are meant to be applied by all companies, juniors often lack the capacity and resources to implement them. Some of the tools developed by PDAC, such as the e3 Plus Framework, appear to better meet the needs of junior companies in managing social and environmental risks

Finding #3: The Strategy was intended to cover both mining and oil and gas extraction. However, there has been significantly greater engagement with the mining industry. 

The Strategy has played a greater role with mining companies as opposed to oil and gas companies.  This appears to be due to a series of factors.

First, the nature of the offshore oil and gas activities is less clear-cut in terms of ownership by Canadians.  The majority of Canadian oil and gas operations are within North America, with independent subsidiaries implementing activities for the companies abroad. Complex ownership structures that may involve companies from multiple countries create further difficulties in identifying whether a company operating internationally is truly "Canadian." 

Second, compared with mining companies, Canadian oil and gas companies appear not to rely significantly on domestic industry associations for guidance on CSR best practices when operating abroad.  Most prefer to participate in international industry platforms such as the global oil and gas industry association for environmental and social issues (IPIECA).   This could explain why there has been limited involvement in activities undertaken via the Strategy by this sector and the Canadian Association of Petroleum Producers, a major industry association representing Canadian oil and gas companies.

Third, mining and oil and gas industries face different operating challenges internationally. The infrastructure requirements for mining projects, such as port facilities, roads, water and power supplies, are typically more demanding than those for oil and gas projects.  Furthermore, the visible impact of mining projects on local communities tends to be more substantial than that of oil and gas projects.  Mining has greater linkages to the local economy, and more visible environmental impacts.

Despite these differences, there is starting to be an increasing convergence between the operational risks faced by mining and oil and gas companies.  Canadian oil and gas companies are increasingly moving into international markets with recognized hydrocarbon potential that are also subject to legacies of armed conflict, community opposition, resource nationalism or weak governance regimes. Greater reliance on unconventional reserves may require increased investment in infrastructure and may result in increased operating costs and more tangible impacts on the livelihoods of surrounding communities.

Given this convergence of operating risks, the prevailing opinion of stakeholders was that there is a continued need to support both mining and oil and gas companies in managing the social, environmental and economic risks associated with their operations abroad.

Finding #4: The concept of CSR and the context for responsible business practices has evolved since the release of Canada’s Strategy. The Strategy no longer fully reflects the current context for host country capacity-building, social governance issues, and engagement with communities.

The Roundtables held prior to the development of the Strategy focussed on identifying methods to improve the credibility and reputation of the Canadian extractive industry overseas through leadership on standards and best practices and mechanisms for greater accountability.  The Strategy built on this and identified methods to support voluntary adherence by Canadian firms, enhancing their ability to manage social and environmental risks.

The CSR concept and its context have evolved since the announcement of the 2009 CSR Strategy in a number of important ways. Global perspectives on responsible business practices increasingly emphasize the need to create shared value between companies and communities and clarify the roles of government and companies related to human rights. Companies and civil society have both identified the growing importance of the enabling environments within countries as a key variable.  While companies are an important part of the equation, local governments are also seen to be critical for ensuring that natural resources are managed in an economically, socially and environmentally sustainable manner. 

There has been an increasing recognition that the development and environmental outcomes associated with extractive sector investments could be improved at the country level.  Tax revenues and royalties collected by governments have often failed to contribute to better quality of life for local stakeholders due to corruption and lack of capacity among host governments to direct funds toward long-term development. Both corruption and lack of host government capacity to enforce environmental regulations and standards have contributed to environmental degradation as some companies obtain concessions without proper impact assessments being conducted or choose to neglect environmental risks associated with their operations.  The growing importance of initiatives such as the EITI is a reflection of this.

The dialogues around CSR are now increasingly recognizing the complexity at the country level and calling for greater support for capacity development. There is a growing call for community capacity-building to support the sustainability of extractive sector investments, the responsible management of royalties and the application of CSR guidelines and standards to local supply chains. 

Many developing countries endowed with natural resources such as minerals and hydrocarbons face challenges in implementing legislative and regulatory regimes to help ensure natural resource extraction is managed in an environmentally sustainable and socially responsible manner. Recognizing the importance of strong natural resource governance capacity, transparency and accountability, the Strategy sought to build upon previous development assistance initiatives to increase the natural resource governance capacity of host countries. A commitment was also made to support the implementation of the Extractive Industries Transparency Initiative.  

In the absence of government capacity to manage natural resource extraction sustainably and transparently, extractive sector activities can result in diminishing development outcomes and contribute to corruption and mismanagement by local and national governments in developing countries. The capacity of regional and local governments to manage revenues, rents and royalties from natural resources is an equally important issue that can exacerbate regional inequalities and increase the likelihood of conflict.    

Many interviewees emphasized the continued importance of promoting responsible and sustainable governance of extractive activities, including as part of the development assistance.  Some representatives of host country governments noted that consistent enforcement of existing mining regulations and legislation as well as the management of disputes with remote communities remains a major challenge. Civil society actors identified a need for increased transparency to ensure that thorough environmental and other assessments are conducted by governments prior to the issuance of concessions and mining licenses.

Companies and representatives from industry associations confirmed that gaps in host country governance capacity create additional challenges for Canadian companies seeking to operate responsibly abroad in a stable and predictable business environment and noted a need for continued and expanded support from the GoC to assist the countries. Lack of capacity within national, regional and local governments to manage revenues and royalties transparently have resulted in millions of dollars in financial contributions either going unspent or not being directed toward sustainable development, increasing tensions with local communities.

Mission staff working abroad in countries with substantial Canadian mining assets similarly identified a continued and widespread need for increased natural resource governance capacity.  However, they noted that GoC support to this end is minimal unless the country is a developing one that has been identified by the former CIDA as a country of focus or modest presence. Additional support to increase capacity related to understanding how the extractive sector operates, managing the rights of indigenous peoples, and planning for long-term development, could be of particular benefit.

New internationally recognized standards have emerged to help companies manage social, economic and environmental risks through responsible business practices, and existing standards have been updated or expanded. These standards are facilitating a shift towards fuller integration of CSR into day to day operations.  For example, evidence from field visits and interviews with Canadian companies demonstrate that companies are increasingly looking to more recently developed standards for guidance in engaging with communities and the development of local supply chains. An often quoted standard by some companies abroad was the ISO 26000 on social responsibility.^{Footnote 7}

Stakeholders from industry also noted that the CSR standards and tools promoted by the Strategy do not sufficiently address the specific challenges faced by junior mining companies.  Even though these standards are meant to be applied by all companies, juniors often lack the capacity and resources to implement them. Some of the tools developed by PDAC appear to better meet the needs of junior companies in managing social and environmental risks. The PDAC e3 Plus Framework for Responsible Exploration helps exploration companies improve their social, environmental and health and safety performance and comprehensively integrate these three aspects into all their exploration programs. It is a voluntary guideline designed to help inform explorers in their decision-making while engaged in exploration projects around the world.   

Finding #5: The international extractive sector continues to merit specific attention with regard to CSR due to the unique set of challenges faced by mining and oil and gas companies.

Extractive sector investment has the potential to result in economic and social opportunities through private sector development and the generation of revenue that may be invested into infrastructure and social programs. However, poor management of social and environmental factors related to a project may lead to environmental degradation, conflicts with local governments and communities, and poor development outcomes. These outcomes go on to impact the competitiveness of companies through reputational damage as well as increased costs due to project delays.

Avoiding these costs and ensuring that an investment makes a positive contribution to the development of surrounding communities requires management of a range of inter-related risks at the project level. The multifaceted nature of the risks faced by extractive sector companies operating abroad as well as the potential impact on their reputation and competitiveness, suggests that the international extractive sector continues to merit specific attention in the promotion of CSR standards and the implementation of responsible business practices in international operations.

Many communities and local civil society organizations are well aware of the legacy of poor environmental practices associated with some extractive projects and remain opposed to all new and existing developments, regardless of the environmental practices that may be employed by a particular company. Evidence from field visits, interviews with industry representatives, and available literature demonstrates that many local stakeholders in countries with significant extractive sector investment do not trust the will or ability of their governments to ensure appropriate environmental stewardship in extractive operations. Inconsistent environmental management of some actors further stokes these negative perceptions of the extractive sector among community stakeholders, leading to continuing operational challenges for Canadian companies that are active internationally.

In addition, mining and oil and gas investments are increasingly located in developing and fragile states, areas of conflict and political instability, as well as in countries with corruption.  This can lead to a series of issues facing firms.  Mining operations are often in remote areas that are under-served by the central government. In many cases, it appears that communities expect companies to “take the role of government” in providing services and infrastructure. 

Companies continue to face challenges in areas such as land acquisition, lack of land titles, and resettlement of indigenous populations. 

Both the range and scale of these challenges as well as the extent of the impact on the competitiveness of Canadian companies continues to justify the continued implementation of a Strategy by the GoC.  Assessment of these risks also demonstrates that there are opportunities for the GoC to provide additional support to Canadian companies in helping to build the capacity of local and regional governments, supporting and endorsing the development of local supply chains and partnering with companies and central governments to address challenges associated with informal mining.

4.2 Relevance Issue 2: Alignment with Government Priorities

Finding #6: The Strategy is consistent with DFATD’s priorities, including support for international business development and partnering with the private sector to create economic benefits for the developing world.

Five years after the initial implementation of the Strategy, the objective of creating a competitive advantage for companies through enhancing their ability to manage risk continues to align with Canada's foreign policy priorities.  DFATD's role in promoting awareness of CSR standards among Canadian companies and helping to build the capacity of host governments to govern the extraction of their natural resources is consistent with departmental priorities, including:

• Contributing to economic prosperity through expanding and deepening commercial relationships in high-growth and emerging markets;
• Promoting democracy and respect for human rights; and
• Reducing poverty through the stimulation of sustainable economic growth and working with the private sector as partners in development.

The new departmental priorities include elements of Canada's foreign affairs, international trade and international development agendas, reflecting the recent amalgamation of the former Department of Foreign Affairs and International Trade and the former Canadian International Development Agency. The Strategy reinforces the DFATD`s vision of an integrated and effective presence in Canada and abroad that brings together development, trade and foreign policy perspectives to pursue Canada's interests through coherent policy, programming and service delivery.

The CSR Strategy is also aligned with NRCan’s first Strategic Outcome – aimed at helping the natural resource sectors become more globally competitive.

The Global Markets Action Plan builds upon the progress achieved under the Global Commerce Strategy to increase Canada's competitiveness in target markets. The Action Plan targets emerging markets that have either broad Canadian interests or specific opportunities for Canadian businesses. These target markets include several countries that have considerable CMAAs or potential investments, including Colombia, Peru and Tanzania.  Under the Global Markets Action Plan, the development, trade and political agendas will work together toward common objectives.  Canada will allocate additional trade commissioners in target countries to promote market access and provide comprehensive market intelligence. Furthermore, the Action Plan will include development of an Extractive Sector Strategy to promote the interests of Canadian extractive sector companies abroad.

The Strategy is also aligned with the GoC's foreign policy priorities in the Americas, reflected in the Americas Strategy.  Since 2007, Canada has been working to expand and deepen its economic and political relationship with the Americas by:

• Increasing mutual economic opportunity through trade and investment;
• Leveraging bilateral assistance for sustainable economic development; and
• Sharing technical expertise for sustainable natural resource management.

The Strategy is aligned with a number of other recent international initiatives that seek to improve the competitiveness of Canadian companies investing abroad, promote international environmental and labour standards and create an equitable and transparent investment climate for Canadian companies.  The Trans-Pacific Partnership initiative seeks to establish a Free Trade Agreement (FTA) for 12 countries in the Asia-Pacific Region.  The agreement will strengthen legal protection for investors and improve access to transparent dispute settlement mechanisms. The 12 negotiating members include countries that are important for the Canadian extractive sector including Chile, Peru and Mexico.

At the 2013 G8 Summit in Lough Erne, the member states noted that the lack of strong systems for transparency and accountability in the management of the extractive sector in some countries has allowed for extractive sector revenues to be diverted away from development goals and initiatives. The G8 committed to raising standards for transparency in the extractive sector through: building the capacity of the companies to manage their natural resources effectively; reducing the prevalence of corruption and other illicit activities; and encouraging states to sign on to the EITI. In June 2013, the GoC announced a partnership with Peru and Tanzania which will seek to increase transparency and strengthen governance of the oil, gas and mining industries. To this end, the GoC will work with government, civil society and companies to strengthen regulatory oversight, tax and audit coordination and management of royalties by local and regional governments.

Canada has pursued a more transparent and predictable investment climate for Canadian companies by negotiating Free Trade Agreements (FTAs) and Foreign Investment Promotion and Protection Agreements (FIPAs) with its international partners. Canada currently possesses FTAs with a number of countries with important extractive sector investments and potential including Peru, Colombia and Chile.  Negotiations for further FTAs are ongoing with the Dominican Republic and Guatemala. More recent agreements include provisions that promote responsible investment by requiring protection of the environment and adherence to international labour standards.  They are also increasingly including requirements for responsible business practices.   

FIPAs provide additional protection for Canadian companies investing abroad through legally binding rights and obligations for companies and host countries. FIPAs help protect Canadian companies by creating a stable, equitable and predictable investment climate and providing access to fair and transparent dispute resolution mechanisms. Of growing importance to extractive sector companies, FIPAs help protect companies against expropriation without compensation.  Canada currently has FIPAs in force with several countries with Canadian extractive sector investments and potential, including Peru, Ecuador and Tanzania.

Canada continues to include voluntary provisions for CSR in its FTAs and in its FIPAs with other countries, for example, most recently with Colombia, Peru and Panama.

4.3 Relevance Issue 3: Consistency with Federal Roles & Responsibilities

Finding #7: The Government of Canada and DFATD in particular, have a key role to play in the promotion of stakeholder cooperation and the identification of means to address evolving CSR challenges in the international extractive sector.

There is broad consensus that the GoC has a role to play in helping mining companies understand and apply CSR standards and in enhancing the capacity of host governments.  The recent amalgamation of the former CIDA and DFAIT into DFATD provides opportunities for improved alignment between initiatives that support GoC priorities for diplomacy, trade and international development.  This improved alignment should strengthen support in the future.  The GoC has been active in strengthening and promoting the OECD Guidelines for MNEs, including leadership in the OECD Working Party on Responsible Business Conduct and the NCP community through peer reviews and technical support provided to key countries to implement the OECD Guidelines for MNEs (e.g. Peru and Colombia). 

International evidence indicates that governments of like-minded countries promote responsible business practices in extractive and other industries through government-supported initiatives. For example, the Australia Mining for Development Initiative recognizes the role that governments can play in promoting better regulation and governance of the mining industry in host countries and maximizing the potential development benefits of mineral wealth. The Initiative seeks to enhance responsible resource governance in developing and emerging economies through knowledge transfer initiatives involving the Australian government, the private sector and universities. Under this Initiative, Australia provides practical advisory, education, tools and training services to help host governments better engage with local communities, protect the environment, build geosciences expertise, strengthen regulatory frameworks and build government capacity to enforce them.

Other governments such as Germany, Norway and the European Union (EU) are also increasing their competitiveness in the international extractive sector through capacity-building initiatives such as science and technology partnerships. Canadian Trade Commissioners abroad noted that investment in capacity-building, knowledge transfer and creation of an enabling environment for responsible business practice has contributed to the competitiveness of Australian and other mining companies in key regions such as Latin America.  

4.4 Performance Issue 4: Achievement of Expected Outcomes

4.4.1 Improve Canadian Companies’ Competitive Advantage

Finding #8: Overall, the Strategy has had a positive impact on how Canada’s leadership role in the promotion of key CSR guidelines and standards is viewed abroad.

Canada’s Strategy sought to “improve the competitive advantage of Canadian companies by enhancing their ability to manage social and environmental risks.”  The Strategy has provided a clear statement of the GoC’s expectations for the conduct of Canadian companies abroad, increasing companies’ awareness of key guidelines and encouraging them to adopt responsible business practices.

From the evidence gathered for the evaluation, gains have been seen in a number of areas.  For example, the capacity building initiatives, including bilateral assistance programs and information sharing initiatives, have contributed to Canada’s image as a source of natural resource governance expertise.  Expertise supplied by both NRCan staff and DFATD staff and projects has increased Canada’s profile internationally and produced results at the country level.

The Strategy has given the GoC a framework to convene a multi-stakeholder dialogue on the importance of CSR in the international extractive sector.   In particular, Canada’s missions abroad have successfully leveraged Canada’s image as both an “honest broker” and a leader in the promotion of responsible business practices through implementing a range of initiatives involving industry and local stakeholders.

According to the 2013 Survey of Canadian Extractive Sector Companies^{Footnote 8}, 50% of the companies surveyed are aware of the GoC’s Strategy (up from 42% in the 2012 survey). The alignment with a government-supported strategy has increased the credibility of CSR initiatives implemented by Canadian companies abroad. Companies have indicated that this provided added value to their engagement with communities and civil society groups.

4.4.2 Pillar 1 – Host Country Capacity Development

Finding #9: Some progress has been made by the Government of Canada in creating an enabling environment for CSR through international information sharing initiatives and bilateral cooperation projects in countries and regions with large Canadian extractive sector investments. 

The GoC has contributed to the IGF, a mechanism for sharing extractive sector expertise internationally.  Although the Forum was established prior to the creation of the Strategy, many of its activities complement the Strategy’s capacity-building objectives.  The IGF has provided a space for both developed and developing countries to share best practices for natural resource governance and discuss common challenges.  Canada’s contribution to the IGF has supported the development and promotion of capacity-building tools and initiatives such as the Mining Policy Framework, a compendium of mining-related best practices.

Long-standing and large-scale cooperation initiatives in Peru have helped create a more transparent and consistent regulatory environment for Canadian companies, and have helped establish Peru as a key market for Canadian investment. Canada has supported the establishment of CSR networks in Senegal, Cote d’Ivoire,  Burkina Faso to enable information sharing among stakeholders to identify and resolve problems related to natural resource governance, extractive sector challenges and capacity-building. The missions in the DRC, Ghana, Nigeria, Indonesia, South Africa and Colombia have also been active or established networks supporting the Voluntary Principles on Security and Human Rights efforts.

Some long-term projects such as PerCan and the Bolivia Hydrocarbon Regulation Assistance Project have helped build the capacity of governments in countries with considerable Canadian mining assets or extractive sector potential.^{Footnote 9}  Available evidence indicates that these projects have increased the capacity of host countries to manage the environmental and social impacts of extractive industries, and to administer extractive sector tax and revenue regimes for the benefit of the country.

Between FY 2009 to FY 2013, 68 projects and initiatives were implemented by former CIDA in various countries and regions with a total disbursement of $90 million.  These initiatives have made some progress toward the achievement of outputs and immediate outcomes.  The Andean Regional Initiative has led to the creation of projects that leverage partnerships with extractive sector companies to build the economic capacity of local communities.  Partnerships with Canadian NGOs such as Plan Canada and World Vision have contributed to building local governance capacity, established community forums and provided entrepreneurial and vocational training in Peru and Burkina Faso.

While companies and NGOs view these partnership efforts as means for achieving “win-win” outcomes, some of the projects have been subject to criticism in Canadian and host country media.  This criticism was mainly due to a misperception of project objectives and the broader benefits for local communities, including the focus on leveraging the contributions of all project partners. In some cases, an assumption was made that the Official Development Assistance funds were subsidizing the private sector, for-profit activities of Canadian extractive sector companies. In fact, funding was provided to NGOs to implement activities within communities, in coordination with extractive sector project partners. 

Finding #10: Despite the progress made in specific countries, overall progress in building capacity and creating a positive enabling environment for responsible business practice has been uneven. Opportunities are being missed to better align programming to potential opportunities.

Despite the successes outlined above, the ability to enhance the enabling environment in countries has been impeded by external factors.  Challenges at the country level remain complex.  For example, the development of licensing processes and mining codes is often limited by the lack of host government capacity to implement these tools in a consistent, timely and transparent manner.  Resource nationalism and the ongoing politicization of natural resource extraction, particularly mining, threaten the sustainability of results achieved through capacity-building initiatives to improve natural resource governance.  The potential results of information-sharing forums are limited by the political will and capacity of member countries to implement natural resource governance initiatives.

In addition, Canada’s piloting of capacity-building initiatives in particular countries or regions also meant it was not implemented on a wide enough scale to address local natural resource governance challenges and create an enabling environment for CSR.  Large scale capacity-building initiatives have been implemented in a limited number of countries (e.g. Colombia, Peru, Bolivia, Tanzania and Senegal).  In other countries, Canada has implemented only small scale initiatives that have not had a tangible impact on local natural resource governance.  Development priorities in the former CIDA’s countries of presence and of modest focus did not always reflect the presence of Canadian companies or the extractive sector potential in these countries (e.g. Guatemala and Mozambique).  

In the past, there have been missed opportunities to develop better linkages between development programming and commercial opportunities. Despite the presence of potential opportunities, there is limited evidence that Canada is fully using its potential to transfer relevant Canadian expertise to host countries in helping them establish mining laws, implement tax and royalty regimes, conduct environmental assessments, work with indigenous communities, and enforce social and environmental standards.

Stakeholders at missions note the need for capacity-building support in emerging and developing economies with considerable CMAAs or mining potential. However, some countries with sizable CMAAs or extractive potential lack a Canadian development presence, limiting the ability of the GoC to address challenges related to host country capacity (e.g. Chile, Panama, Argentine, Zambia and Madagascar). In addition, the potential to leverage the expertise of other departments such as NRCan, AANDC, Finance Canada, Justice Canada and Environment Canada through international capacity-building initiatives has not been fully explored.

Several missions have expressed interest in the new Canadian Institute for the International Extractive Industries and Development (CIIEID). The CIIEID was just established as the evaluation was conducted, and there was insufficient evidence indicating how this Institute would contribute to host country capacity-building.
Finally, opportunities have not been fully leveraged for Canada to cooperate and coordinate with like-minded countries to implement host country capacity-building initiatives on a large scale and expand the reach of Canada’s capacity-building initiatives to other countries with Canadian extractive sector investments.  Countries such as Australia have put in place programming to support capacity development for the international extractive sector.  Collaborating with these other initiatives will allow broader coverage and more improved enabling environments where Canadian firms are active. 

4.4.3 Pillar 2 – Promotion of CSR Guidelines

Finding #11: Extractive sector companies note the potential value-added of extractive sector CSR initiatives in countries and regions with a history of poor mining practices and related negative environmental impacts or social conflicts with local communities.  CSR-related activities implemented by missions and regional offices provide value-added to the competitiveness of Canadian extractive sector companies.

Staff at missions have successfully used the CSR Fund and the Post Initiatives Fund (PIF) and leveraged other sources of funding to promote best practices, facilitate dialogue between stakeholders and communicate the GoC’s position on the importance of responsible business conduct in the international extractive sector.  The approaches tend to be targeted and focussed on broad-based promotion. Some examples of these results include the following. 

• Some missions have successfully used the Strategy to advocate to host governments of the importance of CSR and the benefits of responsible mining in countries where mining has become a political issue (e.g. Mongolia and Greece).   
• “Regulatory Diplomacy” is an approach used by some missions as a new way to support host country capacity-building and to promote regulatory reforms such as new mining codes and transparent licensing processes. 
• The creation of multi-stakeholder forums that promote dialogue and sharing of best practices allowed for discussion of emerging CSR challenges and encouraged the development of networks within the countries. These have been important for supporting Canadian firms.  Stakeholder roundtables and forums were well attended and allowed companies to meet and engage local stakeholders in a constructive discussion of CSR challenges and emerging issues.  Participation in events organized by the GoC helped promote the CSR activities and initiatives of Canadian companies. 
• Engagement of experts to meet with stakeholders, discuss CSR-related issues and assess local extractive sector challenges in countries such as Greece and Colombia have allowed stakeholders to obtain outside expertise and new methods for approaching issues.
• Adaptations have been made to NRCan’s Canadian Mining Toolkit to help companies deal with challenges associated with Latin American markets and communicate best practices (e.g. Peru, Colombia and Chile).
• Missions in Latin America and West Africa have coordinated to successfully implement regional CSR initiatives.  This has included the East Africa Regional CSR Workshop, cooperation on the EITI, promotion of the UN Guiding Principles on Business and Human Rights and the establishment of a CSR initiative in Senegal supported by the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).
• Missions have coordinated to send key stakeholders (e.g. representatives from government and NGOs, community leaders and journalists) from their region to conferences and events hosted by Canadian industry associations such as PDAC.

Companies note that Canada’s staff abroad provide valuable information about the local business environment and arrange meetings with key officials to facilitate market access. Mission staff are regarded as a valuable link to civil society networks that can assist in the establishment of community engagement mechanisms and local supply chains.

In Canada, initiatives hosted by DFATD’s Regional Offices demonstrate that there is a strong interest among domestic stakeholders to discuss CSR-related challenges in the Canadian international extractive sector. The Regional Office in Calgary leveraged considerable industry support for a CSR event in 2014, highlighting the concept of “Shared Value”.  Such initiatives may be successful in reaching junior companies and explorers prior to implementation of activities abroad.  This is an important factor since many events tend to attract the same larger companies that already have extensive CSR programming.  

4.4.4 Pillar 3 – Office of the Extractive Sector CSR Counsellor

Finding #12: The Office of the CSR Counsellor has been fulfilling its mandate to promote the importance of remedy, as well as the Office’s dispute resolution mechanism.  However, despite the range of promotional activities undertaken, Canadian companies and some staff at missions report that the mandate of the Counsellor is unclear.

One of the purposes of the Office of the Counsellor is to advise stakeholders on the implementation of the endorsed CSR performance guidelines. The CSR Counsellor has promoted the Office and CSR best practices through producing several events, meetings, as well as Op Ed pieces and a range of publications.  The Counsellor has travelled extensively in countries with significant CMAAs, such as Peru and Colombia.

While the Office has raised the visibility of CSR and the remedy mechanism, awareness of CSR ad the Counsellor’s mandate is uneven.  The promotional activities have not been undertaken across the mission network.  Some missions in countries with large CMAs in Asia and Africa indicated that they had limited or no engagement with the CSR Counsellor, despite expressed interest in receiving more information and engagement. 

This has caused confusion among stakeholders and missions in terms of the actual mandate of the Office, which in turn has led to more limited results from the CSR promotional work done by the Office. 

Finding #13: Over the three years since its establishment, the Office has yet to achieve a sufficient level of buy-in among key stakeholders and can be more effective in providing a credible dispute resolution mechanism.

The second part of the mandate of the CSR Counsellor is to review the CSR practices of Canadian extractive sector companies operating abroad.  The Counsellor responds to requests for review from an individual, group or community who believe they have been negatively affected by the actions of a Canadian extractive sector company.   As well, Canadian mining, oil and gas companies who believe they are the subject of unfounded allegations concerning their overseas activities may also bring requests to the CSR Counsellor.  A five step process was developed, which relied on building structured dialogues among the parties. Involvement in the process is voluntary.

Since its establishment, the Office has received six requests for review, with one request progressing to mediation. In each case, the companies or NGOs involved have chosen to withdraw from the process before it has been completed.  While the reasons for the withdrawals vary, the prevailing perception is that the process does not add value and that any findings would be difficult to justify without further analysis and investigation, which the Office is not resourced to conduct. The Office was intended to facilitate dialogue and provide objectivity in resolving disputes. However, both companies and NGOs perceive Canada’s NCP to be more objective and independent. The NCP operates under the auspices of the OECD Guidelines for Multinational Enterprises.  It typically deals with review of cases in countries that do not have their own NCP process or mechanism i.e. non-OECD countries that have not adhered to the Guidelines.  The Canadian NCP is also the lead for requests for review of non-Canadian companies operating in Canada.  The CSR Counsellor’s Office does not have the level of human resources or official status of the NCP.

Finding #14: Although some stakeholders have suggested that the mandate of the CSR Counsellor be strengthened, neither the Office nor an Ombudsman would be able to compel companies to participate in a non-judicial dispute resolution mechanism for the implementation of voluntary CSR standards.

The voluntary nature of the reviews done by the Office has raised concerns by stakeholders from NGOs and civil society organizations.  They have noted the need for a dispute resolution mechanism that identifies gaps in the application of CSR standards and holds companies accountable for their actions abroad.  Currently, the Office has no enforcement mechanism. Some interviewees have suggested that an Ombudsman model would be more appropriate; however, no one has elaborated on how a Canadian Ombudsman would be mandated to resolve disputes occurring in foreign jurisdictions.  Other stakeholders have suggested that the CSR Counsellor Office publish final reports on the results of each dispute resolution process by indicating who is in violation of the CSR standards in order to encourage companies to resolve CSR-related disputes in good faith.

Regardless of the model chosen - be it a CSR Counsellor or Ombudsman—there is no vehicle available to compel companies to participate. Adherence to CSR standards remains voluntary and therefore the establishment of a compliance mechanism would remain a challenge.  In addition, the CSR related disputes arise in countries outside of Canada, raising issues regarding foreign jurisdictions, legal frameworks and local customs.  Any potential or real conflicts and disputes would therefore be better addressed through local dispute resolution mechanisms.

Concerns were raised by companies over the fairness and implementation of a “name, blame and shame” approach to dispute resolution.  Stakeholders from industry noted that findings of fault carry potential legal consequences that would require more robust procedural mechanisms and analytical capacity than both the Office and Canada’s NCP currently possess, and would significantly impede these mechanisms from having a dispute resolution/dialogue facilitation role.  These processes would be extremely costly.  There are some examples of these reports being issued successfully by the NCPs of other OECD countries (e.g. Norway, the Netherlands and the United Kingdom). However, neither the Office nor Canada’s NCP are sufficiently resourced or have the mandate to conduct detailed fact-finding activities.

Staff at DFATD HQ also expressed concerns that such an approach would be effective in ensuring the remediation of harm caused. The GoC currently prefers a mechanism that seeks to establish dialogue, agreement and understanding between the parties in a dispute. This approach is more in line with the OECD Guidelines for MNEs and would need to remain voluntary.

4.4.5 Pillar 4 – Centre for Excellence in CSR

Finding #15: The rationale behind the development of the Centre for Excellence (CfE) in CSR still holds. The CfE has made some progress in providing a web-based tool for communicating CSR best practices, but has further potential.  

Within the Strategy, the development of the CfE was a response to the cited need for “information, education programs, and tools” to enhance the capability of Canadian companies, particularly juniors, to address CSR in their operations.

The evaluation found that there remains a need to provide information and tools to companies across the sector. Input received also indicates that many junior firms continue to lack awareness of the relevance of CSR to their operations and that there remains the belief that they do not have the capacity to integrate CSR into their activities.

The CfE was to be created in an existing institution outside the government and was intended to serve as a multi-stakeholder tool and forum for companies to access high quality information and guidance on CSR best practices, emerging issues and challenging operating environments. Among other activities, the CfE was to achieve this aim through the creation of a web-based "community of practice" among civil society organizations and companies to promote increased awareness of best practices and discussion of ongoing issues of concern. 

The Government contributed three years of funding to the development of the CfE, which is housed within CIM.  The CfE’s Executive Committee includes a broad range of extractive sector stakeholders. An important point brought up in the evaluation was that government support was based on the understanding that private sector members would provide substantial additional funding. Early in the development process, however, some non-industry members noted that the credibility of a centre funded primarily through private sector contributions would likely be questioned by some members. The resultant solution, having private sector only match government funding, left the CfE with fewer resources than originally envisaged.   

The CfE created a public, web-based platform for stakeholders to share their CSR expertise and best practices.  The website contains a number of tools such as CSR toolkits, examples of corporate CSR policies, sustainability reports and a directory of CSR stakeholders.  Also, initial progress has been made toward developing country profiles that provide information on the CSR-related context in key markets. The evaluation found that website users, as well as CfE members, believe the site would be enhanced if more detailed (site-level) information and functionality were added..   

Although not within the scope of this evaluation, comments related to the functioning and administration of the CfE are provided in the event they are found helpful for the CfE going forward. Key observations in this domain included that the decision-making structure, requiring consensus among the 24 Executive Committee members, did not allow for timely decisions or actions. It was also brought to the attention of the evaluation that the CfE could benefit from a full-time staff member to ensure adherence to plans and timelines. Several sources suggested that clarifying the goal of the CfE as a solutions-oriented centre would better manage expectations of, and attract relevant expertise for, the Executive Committee. Finally, the question of funding sources will need to be addressed.

Overall, while the Government fulfilled its commitment to provide initial funding for the CfE’s development, the CfE, with its multi-stakeholder composition, has untapped potential in terms of serving as a tool and forum for high quality guidance on CSR best practices. If realized, this potential would complement the GoC’s efforts to create and disseminate CSR-related information and best practices.

4.5 Performance Issue 5: Demonstration of Efficiency & Economy

Finding #16: The launch of Canada’s Strategy coincided with a period of fiscal restraint for the Government of Canada. Consequently, the level of resources devoted under the Strategy, both human and financial, has not been sufficient to fully support coordinated, long-term initiatives or achieve longer-term results.

The potential value-added of Canada’s network of missions abroad is influenced by the lack of sufficient resources (both human and financial) and extractive-sector expertise in key markets.  Within DFATD, the missions and regional offices have been able to leverage the CSR Fund within the Client Services Fund.  Since the approval of the Strategy, $1.295 million has been allocated to the CSR Fund.  This has been spread across more than 250 initiatives, meaning the average initiative is approximately $5,000. 

While the available funding has produced positive results, as noted above, the scale of initiatives often had to be reduced as the CSR fund was consistently oversubscribed, leading to the rejection of some proposals and a reduction in the scale of proposed initiatives. In the absence of sufficient funding, missions have been creative in leveraging other sources, including contributions from industry.  However, opportunities are being missed to more effectively promote CSR.  Stakeholders at missions also report a lack of predictability in the allocation of funds or the amounts approved, which creates challenges for strategic, long-term planning of initiatives to sustain Canada’s visibility and build upon stakeholder engagement.

The lack of sufficient resources has impacted the ability of missions to establish a network of key contacts on the ground and identify Canadian companies that are active in their region.  These networks and contacts are important to gain a clear understanding of the issues within the extractive sector and how they play out within the country context.   This is particularly true in countries that have substantial capacity gaps. 

The competing priorities at missions often diminish the capacity of staff to more actively engage with Canadian companies and promote both the Strategy and the Canadian extractive sector brand.  This means that contact is often made when there is an issue that needs to be addressed quickly for a firm.  This makes it difficult for DFATD staff to be proactive.  The number of issues at some missions related to CSR is constantly increasing and outpacing the resources available. Political and trade officers in countries with notable capacity-building needs that lack a development program or section must address these issues in addition to their core responsibilities.  This is exacerbated at times by the lack of CSR expertise among mission staff.

Small missions in countries with strong extractive sector potential and emerging projects report particular difficulties in implementing CSR promotional initiatives beyond their core activities. Staff at these missions also sometimes face difficulties in responding to the administrative requirements for access to available sources of funding and may not have the time to implement the activities that receive funding.  This may leave important portions of the market without CSR promotion and support.

Finding #17: The lack of an implementation plan within DFATD has contributed to uneven awareness, understanding and promotion of the Strategy and the related CSR standards across the mission network.  There has been a sustained effort to promote the Strategy by mission staff, however, some officers reported only limited access to training on the Strategy or CSR-related issues in the extractive sector.

Efforts were made by the International Trade Portfolio Division of DFATD to promote the Strategy to missions after its release, but the level of these effort differed over the years mainly due to the lack of trained staff or higher rotationality of such. Despite being under-resourced, the CSR group in the International Portfolio Division has made significant efforts to promote CSR and provide ongoing support to missions on major CSR-related issues as they arise. While staff at missions are highly appreciative of the support they receive from HQ, many have noted that the Strategy is “too high-level” to serve as a guiding document in their day-to-day operations and provide guidance on the types of activities missions need to undertake. In the absence of clear guidance on implementation, the scope of CSR initiatives has been subject to the level of personal interest and commitment among trade and political officers, as well as engagement by the Head of Mission (HOM).

Although some missions reported successful coordination among trade, political and development staff due to the overlapping nature of CSR in relation to mission sections’ portfolios, many missions continue to view CSR either as a trade or other section’s activity only. However, CSR-related issues such as host country capacity-building, human rights and stakeholder dialogue, require the involvement of both political and development staff.  In addition, there is some lack of coordination at HQ in the implementation of the Strategy. Geographic divisions were not well informed about the progress of the implementation.  Information was rarely shared with these divisions and they did not always have official representatives in the Working Group or the Interdepartmental Committee. 

The Department’s CSR Unit within the International Trade Portfolio and Responsible Business Practices Division (BTA) has developed and provided training on CSR issues in the extractive sector. Despite the limited resources, the Department is making commendable efforts to provide CSR training using various training approaches including workshops, webinars, speaker sessions, etc. Training that is relevant to the Strategy and the implementation of CSR-related initiatives is currently optional for staff posted abroad. Participants in Canada and at mission have expressed high appreciation of the training and its usefulness.

Engagement by the HOMs was found to be essential for the success of CSR activities implemented by missions. BTA has developed specific annual training on CSR for outgoing HOMs, and have had twice HOMs speaking about CSR in their countries of accreditation at international events, such PDAC. The evaluation noted, however, that, a change in HOM or staff at mission and their related understanding of the importance of CSR, or lack of such, can often lead to a shift in terms of the application of the Strategy and diminished effectiveness of the work done to date by predecessors.

Finding #18: The Strategy has led to the creation of some interdepartmental mechanisms to share information on CSR-related activities.  Implementation of the Strategy, however, could benefit from improved coordination among DFATD and other government departments.

DFATD and NRCan have worked cooperatively in implementing the Strategy through quarterly Working Group meetings, chaired at the DG-level in order to discuss and advance CSR-related initiatives. The Interdepartmental Committee convenes 10 departments and agencies involved in the promotion of CSR. While the committee has been an effective coordination mechanism, it was not envisaged to engage in joint planning of CSR-related initiatives.

Key stakeholders report limited coordination in the past under the “Host Country Capacity Building” pillar between former CIDA and DFAIT in the development of key initiatives involving the Canadian extractive sector such as the Andean Regional Initiative.  This was partly due to differences in mandates, priorities and degree of engagement with the Canadian private sector between CIDA and DFAIT.  CIDA in particular placed priorities on development issues versus commercial opportunities.  CIDA also had a small group of countries as priorities, with a substantial amount of funding allocated to these partners.  While there was some overlap between the countries and the CMAs, the coverage was not extensive. 

With the amalgamation under DFATD, the intention is to increase coordination across political, development and trade agendas. This means a greater focus of the development agenda on areas such as building the resource capacity of developing countries, supporting local economic development and enabling communities to maximize benefits from the extractive sector.

Partnership relations between DFATD and NRCan are key for the effective promotion of CSR.  Staff at NRCan have extensive expertise in the issues facing developing countries and their impact on companies’ operations. The two departments are uniquely positioned to assist with the transfer of information, knowledge and expertise.  While NRCan does not have a mandate for capacity building in developing countries, it does have a mandate to promote CSR practices through instruments such as the IGF.  NRCan facilitates the dialogue on mining policy and regulation through presentations at national and international events and contributes to the implementation of the first pillar of the Strategy by sharing best practices for responsible extractive sector development internationally.  However, more effort can be made to link officers at missions abroad to key information on major extractive sector initiatives undertaken by NRCan, such as the Mandatory Reporting in the Extractive Sector.

Finding #19: Creating a competitive advantage for Canadian companies is identified as the strategic outcome of the Strategy. However, the ability to assess the results achieved is limited by the absence of clear objectives, expected results and performance indicators.

While the Strategy outlined four pillars for achieving a competitive advantage for firms, it did not clearly identify performance benchmarks and how performance would be judged.  The absence of performance information has created challenges in terms of:

• Identifying key priorities for CSR-related initiatives;
• Allocating CSR funds across the mission network to address challenges in key markets;
• Identifying successful interventions and best practices to share across the mission network; and
• Promoting transfer of corporate knowledge among staff.

This has been further complicated by the removal of a CSR reporting line from TRIO 2.  This limits the ability of the Trade Commissioner Service (TCS) to document success stories and communicate the results achieved through CSR-related initiatives to senior management. 

The lack of a reporting framework has meant that progress against the Strategy has not been able to be assessed on an ongoing basis to determine results being achieved. 

Finding #20: With the recent expansion of the OECD Guidelines for MNEs, there is considerable overlap between the mandates of the Office of the CSR Counsellor and Canada’s OECD National Contact Point.  In both cases, the level of resources allocated has not been sufficient to support a robust dispute resolution function, or to allow for handling an increased caseload of CSR-related complaints or requests for assistance.

Many stakeholder groups expressed confusion regarding the role of the Office of the CSR Counsellor given that the OECD Guidelines for MNEs have been broadened to include emerging issues such as human rights.  Canada’s NCP now has broader coverage in terms of its mandate.  As mentioned previously, Canada’s NCP is seen as the mechanism of choice by companies and NGOs due to its impartiality.  The issue is whether there is a need for two mechanisms.  The availability of two similar dispute resolution forums has given complainant organizations an opportunity to “forum shop,” preventing the timely and constructive resolution of CSR-related disputes.

The current complement of human resources in both, the Counsellor Office and Canada’s NCP, as well as the available funding do not allow for effective CSR promotion and/or coverage of a greater volume of requests for assistance.  Canada’s NCP currently lacks sufficient dedicated human and financial resources for its activities. As a result, for both these mechanisms, planning and implementation of promotional activities could be improved with additional resources.  Both the CSR Counsellor and Canada’s NCP would face difficulties responding to an increased case load.

5.0 Conclusions of The Evaluation

Conclusion #1: The rationale for having a GoC Strategy for the Extractive Sector remains sound.  Changes since 2009, however, indicate the need for the Strategy to be updated.

Canadian extractive sector investments abroad remain significant, and continue to grow.  An increasing number of companies are becoming aware of various CSR guidelines and standards and are starting to implement them in offshore operations.  However, many companies have not been able to fully integrate CSR into their overall operations.  This is particularly true of junior mining companies that see CSR as less relevant to their business.  Yet their approaches in the initial stages of a development are critical for later positive engagement with communities. 

Companies continue to seek guidance and support from the GoC in managing the risks of operating in complex and challenging environments.  This is partially a reflection of the changing nature of the challenges faced in developing countries.  Issues of the enabling environment within countries have become more critical.  Developing country governments are seen to be essential for ensuring that natural resources are managed in an economically, socially and environmentally sustainable manner.  Their capacity, however, limits their ability to do this.  For this reason, there has been increasing recognition that the development and environmental outcomes associated with extractive sector investment have been disappointing at the country level.  To reverse this trend requires interventions to support governments at the national, regional and local level.

Internationally-recognized standards have been established to help companies manage social, economic and environmental risks through responsible business practices.  These standards have facilitated a shift towards fuller integration of CSR into the day-to-day operations of companies.   As well, the current Strategy has been more applicable to the mining sector than the oil and gas sectors.  Challenges being faced by the latter groups have now increased their demand for appropriate CSR approaches and tools.

Conclusion #2: Results have been seen to date with improving the enabling environment and host country capacities (Pillar 1), and the promotion of CSR guidelines (Pillar 2).  However, some opportunities for maximizing results under all pillars have not yet been fully realized. 

Overall, the Strategy has had a positive impact on Canada’s brand as a leader in the promotion of key CSR guidelines and standards.  The capacity-building initiatives, including bilateral assistance programs and information-sharing initiatives, have contributed to Canada’s image as a source of natural resource governance expertise.  The Strategy has given the GoC a framework to convene a multi-stakeholder dialogue on the importance of CSR in the international extractive sector. Canada’s missions abroad have successfully leveraged Canada’s image as both an “honest broker” and a leader in the promotion of responsible business practices through implementing a range of initiatives involving industry and local stakeholders.

Despite these successes, the ability to enhance the enabling environment in countries with significant extractive sector investments has been impeded by external factors.  Challenges at the country level remain complex, with new issues such as resource nationalism emerging.  Many of the initiatives implemented by Canada to support improved governance have not been of sufficient size to fully address local natural resource governance challenges and create an enabling environment for CSR.  There have been missed opportunities to develop greater linkages between the development programming and commercial activities pursued within DFATD.  Canada is not fully using its potential to transfer relevant Canadian expertise to host countries including working with other international partners.

Conclusion #3: Fewer results have been seen with the work of the Office of the Extractive Sector CSR Counsellor (Pillar 3).

The Office of the Extractive Sector CSR Counsellor has made some progress in promoting the importance of CSR and dispute mechanisms.  However, the mandate of the Office has remained unclear for some stakeholders.  In many countries hosting high levels of CMAs, stakeholders reported limited access to support from the Office due to resource constraints and the inability of one person to cover all missions.

With regard to the implementation of the dispute resolution mechanism, six requests have been received by the Office but only one has advanced to mediation and none of the cases have been brought through the entire process to a defined outcome.  Both companies and NGOs have chosen to withdraw from the process as opposed to proceed.  Companies and stakeholders indicated their preference to deal with Canada’s NCP which is seen as more objective and independent than the Office.  This has meant that limited progress has been made on mediation by the Office.

Conclusion #4: The ability of the Centre for Excellence to achieve its objectives was constrained by a difficult governance environment that undermined consensus building. 

There was agreement that the objectives of the Centre for Excellence were important in terms of providing information on best practices of CSR and enabling a multi-stakeholder discussion on emerging CSR challenges.  However, the CfE has not been able to live up to expectations as envisaged by the Strategy.  Most companies find the website content too basic to be useful in their operations.  The governance structure of the CfE has proven complex and not able to generate a consensus even on the content for the website. 

Issues have arisen with how the CfE can generate funds for continuation.  Industry is prepared to contribute but NGOs feel this would undermine the credibility of the CfE.  NGOs were expecting the CfE would act as a platform for discussions with government.  Companies see this lack of a consensus as a missed opportunity for dialogue.

Conclusion #5: The ability to implement the Strategy has been constrained by the lack of human and financial resources and the lack of an implementation plan that promotes coherence within DFATD and among government departments.

The level of resources devoted under the Strategy, both human and financial, has not been sufficient to support coordinated, long-term initiatives or achieve longer-term results.  This, combined with a limited training for many posted to missions, has resulted in fewer initiatives and a smaller outreach.  Opportunities have been missed in a number of markets.

The lack of an implementation plan within DFATD has contributed to uneven awareness, understanding and promotion of the Strategy and the related CSR standards across the mission network.  There has not been a sustained effort to promote the Strategy among mission staff either because of lack of resources or other competing priorities.  This has been further exacerbated by the insufficient level of coordination between the development and commercial operations of DFATD. Greater coordination is needed between the development projects and the activities supported by missions in key markets. In addition, cooperation with other government departments can also be strengthened.  While DFATD and NRCan have developed a close working relationship, opportunities exist to strengthen the engagement of departments such as Environmental Canada and Industry Canada.

Conclusion #6: The Strategy did not effectively communicate its objectives, expected results and performance benchmarks or indicators.  The lack of a method to assess progress has meant that the decision making could not be evidence based.

While the Strategy outlined eight core elements of activities (including the “four pillars”) for improving the competitive advantage for Canadian extractive sector companies operating abroad, it did not clearly identify performance benchmarks and how performance would be measured.  This has caused confusion in interpreting the actual objectives of the Strategy and in how to define success.  The lack of a results framework has limited the extent to which lessons have emerged from the initiatives undertaken to date.  It has also limited the ability to identify areas where improvements could be made to maximize the results.

6.0 Recommendations

Recommendation #1: Update the Strategy, with particular attention to strengthening coordination among government departments and improving the alignment of Canada’s commerce, development and political initiatives. 

To strengthen the coordination among government departments to create an enabling environment for CSR will require a number of actions.

• A shared statement of objectives and clarification of the roles of DFATD and NRCan in the implementation of host country capacity-building initiatives abroad.
• Identification of long-term capacity-building initiatives that leverage the expertise of OGDs (e.g. EC, and AANDC) to support the creation of enabling environments in countries with sizable Canadian extractive sector investments.
• Continue to support existing industry-led efforts to identify and share innovative CSR-related best practices among Canadian companies.

Improving alignment between Canada’s international commerce, development and political initiatives related to CSR will be particularly critical for the achievement of results.  This will require a number of changes. 

• A renewed governance structure for the implementation of the Strategy is needed that reflects the GoC’s international commerce, development and political objectives.
• The mandates of the CSR Working Group and the Interdepartmental CSR Committee should be reviewed and strengthened to enable coordinated planning, broader promotion and implementation of CSR initiatives.
• Priority markets should be identified for the implementation of government-led CSR initiatives and transfer of CSR-related expertise.
• Better promotion of a coordinated whole-of-mission approach is needed for the implementation of CSR-related initiatives.
• The building of synergies between the Office of the CSR Counsellor and Canada’s NCP is needed to create clarity on the separate roles of the two mechanisms, avoid possible perceived duplication and enhance the effectiveness of these voluntary non-judicial CSR-related dispute resolution mechanisms. 

Recommendation #2: Elaborate a plan to guide the implementation of an updated Strategy as well as future activities and related resource allocation.

A plan is needed to clearly identify methods to implement the updated Strategy.  This implementation plan should include the development of the following:

• Exploring options for complementary initiatives within DFATD as well as other government departments to create synergies and draw on expertise outside GoC.
• Evergreen process for identifying CSR best practices, promotional tools, and new guidelines and standards, including mechanisms for monitoring their implementation.
• An outreach plan to increase awareness of the Strategy at HQ, missions abroad, and other government departments.
• External communication plan and tools, including means to promote Canada’s CSR related expertise and initiatives at major international forums (e.g. G-7 and G-20, the Asia Pacific Economic Co-operation, the Organization of American States, la Francophonie).
• A performance measurement framework that identifies benchmarks and indicators for success in achieving the results for each of the pillars.

Recommendation #3: Continue to develop tools and CSR-related training to support DFATD staff (HQ and missions) involved in the implementation of Canada’s Strategy.

DFATD staff could benefit from additional and more systematic training to increase awareness of the Strategy and assist in its implementation.   Current efforts to develop a comprehensive CSR training curriculum for political, trade and development staff could be scaled up.   Mandatory training should be introduced for staff posted in priority markets/ countries with considerable Canadian extractive sector investments abroad.  Strategies should continue to be developed to support missions in accessing CSR-related resources and elaborating longer-term plans for CSR-related activities.

Recommendation #4: Identify mechanisms for promoting regular engagement between the Government of Canada and other key stakeholders such as companies, industry associations and civil society groups to inform the continuous improvement and renewal of Canada’s Strategy.

Stakeholder engagement activities to promote CSR guidelines, best practices and approaches should be continued and scaled up.  A range of stakeholder platforms currently exist, such as the Centre for Excellence, MAC, PDAC, ICMM and the Devonshire Initiative.  The convening power of these platforms has the potential to increase buy-in for the Strategy and enhance the credibility of GoC efforts to encourage responsible business practices for the Canadian extractive sector.

Recommendation #5: Identify more effective means to further support junior extractive sector companies in the implementation of CSR activities and initiatives that correspond to their needs, operational contexts and investment challenges.

The biggest gaps in terms of CSR applications at the company level are seen with junior extractive sector firms.  A wide range of stakeholders indicated that there was a recognized need to develop and promote CSR tools for junior companies and provide support for the implementation of CSR activities within their specific activities.   This can include supporting mission staff in identifying CSR best practices that are relevant to the operational challenges faced by junior companies and communicating these practices to junior companies.

DFATD should consider scaling up cooperation with federal government partners (e.g. NRCan and AANDC) to promote the adoption and/or implementation of international CSR standards by junior mining companies in their business planning cycles, particularly at the identification and exploration stages. Industry associations such as MAC and PDAC could play an important facilitating role here.

7.0 Management Response And Action Plan

Recommendation 1

Update the Strategy, with particular attention to strengthening coordination among government departments and improving the alignment of Canada’s commerce, development and political initiatives.

Management Response & Action Plan

The CSR Strategy has been updated as of November 14, 2014, (“Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad”). This recommendation will be addressed in the implementation of the enhanced Strategy.

DFATD amalgamation has already contributed to greater alignment, but Management agrees that greater coordination and alignment would be beneficial, and will implement this recommendation.

Responsibility Centre

BTA

Input: MES, IOR, NRCan, EC AANDC, Other OGDs

Time Frame

Strengthening coordination to create an enabling environment for CSR

Management Response & Action Plan

1a. Development of a shared statement of objectives and clarification of roles of DFATD and NRCan in the implementation of host country capacity building initiatives abroad.

Management agrees that a shared statement of objectives and clarification of the roles of DFATD and NRCan would be helpful but would suggest this be for the Strategy as a whole, not only for capacity-building activities.  This would form part of an implementation plan going forward (See also response to Recommendation #2).

Responsibility Centre

Input: MES, IOR, NRCan, EC AANDC, Other OGDs

Time Frame

Management Response & Action Plan

1b. Identification of long-term capacity-building initiatives that leverage expertise of OGDs (e.g. EC, AANDC) to support the creation of enabling environments in countries with sizable Canadian extractive sector investments.

Management agrees that identifying long-term capacity building initiatives that would leverage the capacity of OGDs would be beneficial to the CSR Strategy, and will take that into account in its implementation going forward.  An existing model for such interaction is the Canadian National Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, which includes NRCan and several other OGDs.

Responsibility Centre

Input: MES, IOR DEV Geographics

Time Frame

Management Response & Action Plan

1c. Continue to support existing industry-led efforts to identify and share innovative CSR-related best practices among Canadian companies.

Management agrees to continue to support not only industry-led efforts, as recommended, but also international and the Department’s own initiatives to identify and share innovative CSR-related best practices.  Please note that the enhanced CSR Strategy released on November 14, 2014, now includes CSR guidance released since 2009, namely the United Nations Guiding Principles on Business and Human Rights, and the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.  It also now includes flexibility to build awareness of a broader range of extractive sector-specific CSR guidance, including those developed in Canada, e.g. the Mining Association of Canada’s Towards Sustainable Mining, and the Prospectors and Developers Association of Canada’s e3 Plus.

Responsibility Centre

Input: BBI, MES, IOR, Industry stakeholder organizations

Time Frame

Improving alignment between Canada’s international commerce, development and political initiatives related to CSR

Management Response & Action Plan

1d. A renewed governance structure for the implementation of the Strategy is needed that reflects the GoC’s international commerce, development and political objectives.
There is currently a clear governance structure in place both for the Strategy and the Government’s overall CSR efforts.  This structure consists of two interdepartmental committees, both chaired by DFATD.  These are:

• The CSR Working Group, which covers the CSR Strategy and comprises representatives from DFATD Divisions and NRCan, and
• The Interdepartmental CSR Committee (ICC), which covers CSR issues more generally and has broad representation from across the federal government.

While this structure is sufficient, the release of the enhanced CSR Strategy will be used to reinvigorate the governance structure, as it will be used to coordinate its implementation.

Responsibility Centre

Input: Members of CSR-WG and ICC

Time Frame

Management Response & Action Plan

1e. The mandates of the CSR Working Group and the Interdepartmental CSR Committee should be reviewed and strengthened to enable coordinated planning, broader promotion and implementation of CSR initiatives.

Management agrees with this recommendation, and will undertake to review both committees’ mandates in order to maximize their effectiveness in carrying out the implementation of the enhanced CSR Strategy, in particular aiming to enhance coordination efforts with OGDs.  This will be done in a way that streamlines planning processes.

Responsibility Centre

Input: Members of ICC

Time Frame

Management Response & Action Plan

1f. Priority markets should be identified for the implementation of government-led CSR initiatives and transfer of CSR-related expertise.

Given the evolving nature of CSR demands, Management would instead propose an approach that that will allow the Department to respond nimbly to changing needs, rather than specify certain countries which should receive CSR-related initiatives or expertise.  This would allow the Government to deliver the most effective CSR support in countries where Canadian extractive companies are active and CSR needs are greatest. The updated CSR Strategy strengthens support for CSR initiatives at Canada’s missions abroad to ensure a consistently high level of CSR-related service around the world, and which should allow them to provide CSR guidance relevant to each country or region.  The CSR Fund, a flexible and responsive fund for Trade Commissioner use, is integrated into the annual Strategia planning cycle and intended to support CSR needs in a given country as determined by DFATD representatives on the ground.

Responsibility Centre

Input: Missions

Time Frame

Management Response & Action Plan

1g. Better promotion of a coordinated whole-of-mission approach is needed for the implementation of CSR-related initiatives.

Management agrees to develop a plan to promote a coordinated whole-of-mission approach to implement CSR-related initiatives, as part of the implementation plan for the enhanced CSR Strategy, while noting that lead responsibility to promote Canadian CSR-related initiatives normally resides with the Trade Section of missions.

Responsibility Centre

Input: Missions

Time Frame

Management Response & Action Plan

1h. Building synergies between the Office of the CSR Counsellor and Canada’s NCP is needed to create clarity on the separate roles of the two mechanisms, avoid possible perceived duplication and enhance the effectiveness of these voluntary non-judicial CSR-related dispute resolution mechanisms.

Clarification of the respective roles of the Office of the Extractive Sector CSR Counsellor and the NCP to build synergies forms part of the updated CSR Strategy.  The mandate of the CSR Counsellor will be re-focused to include stronger coordination between the two dialogue facilitation mechanisms.  The CSR Counsellor’s Office will focus on early stage dialogue facilitation, while the NCP will focus on more complex cases, potentially requiring formal, structured mediation.  These changes will be clarified in the strategic direction provided by the Minister to the new Counsellor upon their appointment.

Responsibility Centre

Input: BTR, J-Branch

Time Frame

Recommendation 2

Elaborate a plan to guide the implementation of an updated Strategy as well as future activities and related resource allocation.

Management Response & Action Plan

Management agrees with the recommendation for the creation of an Implementation Plan for the updated Strategy, and will action this recommendation.  It will include development of a framework setting out commitments and discretionary activities as described in the updated Strategy. The Implementation plan will incorporate all of the sub-recommendations under Recommendation #2, with some qualifications as indicated below.

Responsibility Centre

BTA

Input: NRCan, MES, IOR, Other members of ICC

Time Frame

Management Response & Action Plan

2a. Explore options for complementary initiatives within DFATD, as well as other government departments to create synergies and draw on expertise outside GoC.

The CSR Working Group (with representatives from DFATD Divisions and NRCan) and the Interdepartmental CSR Committee, which has broad representation from across the federal government, will be tasked with carrying out the implementation of the updated CSR Strategy.  Their membership will provide the opportunity to explore options for complementary initiatives and to create synergies with OGDs.  The Centre for Excellence will provide a source of CSR expertise outside the GoC.

Responsibility Centre

Input: NRCan, MES, IOR, Other members of ICC

Time Frame

Management Response & Action Plan

2b. Establish an “evergreen process” for identifying CSR best practices, promotional tools and new guidelines and standards, including mechanisms for monitoring implementation.

This will be done as an objective of the implementation plan for the enhanced CSR Strategy.

Responsibility Centre

Input: NRCan, MES, IOR, Other members of ICC

Time Frame

Management Response & Action Plan

2c. Develop an external communications plan and tools, including means to promote Canada’s CSR-related expertise and initiatives at major international forums (e.g. G7, G20, APEC, OAS, La Francophonie).

The Implementation Plan for the enhanced CSR Strategy will contain an external communications plan which will focus on increasing awareness of the importance of CSR in general, including within major international forums.  The updated CSR Strategy contains a designated section entitled “Promoting and Advancing CSR Guidelines” and makes clear the intent to raise awareness in Canada and abroad of recognized international CSR performance standards.

Responsibility Centre

Input: CMC

Time Frame

Management Response & Action Plan

2d. Develop a performance measurement framework that identifies benchmarks and indicators for success in achieving the results for each of the pillars.

A performance measurement framework will be developed as part of the implementation of the enhanced CSR Strategy.  It will follow the measurable results of all DFATD CSR-related activities, not only those that fall under the original “four pillars”.  One of the four pillars (the Centre for Excellence) is not a Government entity and it is therefore inappropriate to establish performance indicators and monitor its results, though the CfE’s activities continue to play a role to further the goals of the Strategy.

Responsibility Centre

Input: MES, IOR, NRCan

Time Frame

Recommendation 3

Continue to develop tools and CSR-related training to support DFATD staff (HQ and missions) involved in the implementation of the CSR Strategy.

Management Response & Action Plan

Management agrees with the recommendation.  DFATD has been implementing a more systematic approach to training within the department since September 2013.  Informal partnerships between existing training and policy sections have been leveraged significantly to share costs and provide officers both in Canada and abroad with the information they need to assist companies in CSR-related areas, including through pilot courses in how to encourage respective, productive relationships between communities and companies, conflict-sensitive business practices, and anti –corruption strategies.

Responsibility Centre

BTA

Input: BTR, CFSI

Time Frame

FY 2014/2015

Management Response & Action Plan

3a. Develop a comprehensive CSR-related training curriculum for political, trade and development staff.

While it is recognized that Trade Commissioner services for companies abroad would benefit from additional training efforts, the ability to deliver a further enhanced program will depend on resource availability.

Responsibility Centre

Time Frame

Management Response & Action Plan

3b. Establish mandatory CSR training for staff posted in priority market countries where considerable Canadian extractive sector investments exist.

Management agrees that such training would be beneficial and will initiate discussions with BTR and CFSI to explore the feasibility of implementing mandatory training for staff in designated priority countries and regions where Canadian extractive companies are active and CSR needs are greatest.

Responsibility Centre

Input: BTR, CFSI

Time Frame

Management Response & Action Plan

3c. Develop strategic guidelines and tools to support missions in accessing CSR-related resources and developing longer-term plans for CSR-related activities.

Management understands mission access to CSR-related resources as a reference to financial resources, including primarily the CSR Fund.  As part of the annual planning cycle, the CSR Fund regularly receives requests for approximately twice the maximum funding envelope available.  Currently, the CSR Fund is part of the overall CSF/ ITSF, and as such only allows for support of small, targeted initiatives delivered and fully disbursed within a single fiscal year.  Longer-term planning may require significantly more financial resources, as well as a new funding model.

Responsibility Centre

Time Frame

Recommendation 4

Identify mechanisms for promoting regular engagement between GoC and key stakeholders (e.g. companies, industry associations, civil society groups) to inform the continuous improvement and renewal of the CSR Strategy.

Management Response & Action Plan

Management agrees that regular engagement with companies, industry associations, civil society and academia informs continuous improvement of the CSR Strategy.  The Centre for Excellence in particular has been identified by stakeholders as an effective platform for regular engagement with the GoC on the CSR Strategy.

Responsibility Centre

BTA

Input: Members of ICC and the Centre for Excellence

Time Frame

Management Response & Action Plan

4a. Scale up stakeholder engagement activities to promote CSR guidelines, best practices and approaches, including with platforms such as the Centre for Excellence (CfE), MAC, PDAC, ICMM and Devonshire Initiative, to increase buy-in for the CSR Strategy and enhance the credibility of GoC efforts.

Over the past year, the Department has scaled up efforts to engage with a range of stakeholder groups to improve in-house knowledge and service to Canadian companies.  More regular engagement in the form of participation or support to CSR-related initiatives of stakeholders will be addressed as part of the implementation plan for the enhanced CSR Strategy.

Responsibility Centre

Time Frame

Recommendation 5

Identify more effective means to further support junior extractive sector companies in the implementation of CSR activities and initiatives that correspond to their needs, operational contexts and investment challenges.

Management Response & Action Plan

Management agrees that more effective efforts targeting junior firms are required.  This will be incorporated into the Implementation Plan for the enhanced CSR Strategy, and has already been integrated to a degree into the CSR training curriculum.  DFATD is working with NRCan in this regard.  The updated CSR Strategy identifies junior extractive companies as a group warranting particular attention, as well as enhanced engagement.  Efforts on this front would also represent a fulfilment of the commitments made to support SMEs under the Global Markets Action Plan.  Also, assisting junior mining companies with CSR advice will be a major part of the work of the Office of the CSR Counsellor.  It should be noted that due to a lack of sufficient Canadian presence, many junior mining firms, ostensibly Canadian, do not actually qualify as clients.

Responsibility Centre

BTA

Input: NRCan

Time Frame

Not defined

Management Response & Action Plan

5a. Develop and promote CSR tools for junior companies and provide support for associated CSR activities.

Stepping up all DFATD services to junior extractive companies would be challenging given their numbers.  The GoC preference is therefore to focus its efforts related to “juniors” on promoting and providing tools on stakeholder engagement, given the important role these companies have in setting the tone for future community relations around a project.  The updated CSR Strategy highlights this approach.

Responsibility Centre

Time Frame

Management Response & Action Plan

5b. Support staff in Canadian missions in identifying CSR best practices relevant to the operational challenges faced by junior extractive companies.

See general response to Recommendation #5.

Responsibility Centre

Time Frame

Management Response & Action Plan

5c. Consider scaling up cooperation with OGDs (e.g. NRCan, AANDC) to promote adoption/ implementation of international CSR standards by junior companies in their business planning cycle, particularly at identification and exploration stages.

Management agrees that efforts could be increased to promote international CSR standards to junior companies.  At the same time, by virtue of their small size and the business risk they incur by focusing on exploration and (sometimes) development, junior extractive sector companies, particularly those in the mining sector, face significant challenges in “adopting” or signing on to many of the international CSR mechanisms.

The updated CSR Strategy now references six international guidelines, now including the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas... At a minimum, the GoC expects junior companies to observe the OECD Guidelines for Multinational Enterprises. Some mechanisms, such as the Voluntary Principles on Security and Human Rights (“the VPs”) allow companies to follow or adhere to the principles without explicitly requiring that they go through formal admission procedures. However, it should be recognized that other mechanisms could pose difficulties for junior companies, or not be appropriate to the host country environment in which they operate.  The implementation plan for the enhanced CSR Strategy will include this recommendation taking into account these considerations.

Appendix 1: List of Findings

Finding 1:

Canada's extractive industry investments abroad continue to be significant.  Despite increased awareness and adherence to key CSR guidelines and standards, the ability of Canadian extractive sector companies to fully integrate CSR into their operations abroad and manage social and environmental risks has been uneven.

Finding 2:

Companies continue to seek guidance and support from the Government of Canada in managing the risks of operating in complex and challenging environments.  This is partially a reflection of the changing nature of the challenges faced by oil and gas and mining companies operating in developing countries.

Finding 3:

The Strategy was intended to cover both mining and oil and gas extraction. However, there has been significantly greater engagement with the mining industry.

Finding 4:

The concept of CSR and the context for responsible business practices has evolved since the release of Canada’s Strategy. The Strategy no longer fully reflects the current context for host country capacity-building, social governance issues, and engagement with communities.

Finding 5:

The international extractive sector continues to merit specific attention with regard to CSR due to the unique set of challenges faced by mining and oil and gas companies.

Finding 6:

The Strategy is consistent with DFATD’s priorities, including support for international business development and partnering with the private sector to create economic benefits for the developing world.

Finding 7:

The Government of Canada and DFATD in particular, have a key role to play in the promotion of stakeholder cooperation and the identification of means to address evolving CSR challenges in the international extractive sector.

Finding 8:

Overall, the Strategy has had a positive impact on how Canada’s  leadership role in the promotion of key CSR guidelines and standards is viewed abroad.

Finding 9:

Some progress has been made by the Government of Canada in creating an enabling environment for CSR through international information sharing initiatives and bilateral cooperation projects in countries and regions with large Canadian extractive sector investments.

Finding 10:

Despite the progress made in specific countries, overall progress in building capacity and creating a positive enabling environment for responsible business practice has been uneven.   Opportunities are being missed to better align programming to potential opportunities.

Finding 11:

Extractive sector companies note the potential value-added of extractive sector CSR initiatives in countries and regions with a history of poor mining practices and related negative environmental impacts or social conflicts with local communities.  CSR-related activities implemented by missions and regional offices provide value-added to the competitiveness of Canadian extractive sector companies.

Finding 12:

The Office of the CSR Counsellor has been fulfilling its mandate to promote the importance of remedy, as well as the Office’s dispute resolution mechanism.  However, despite the range of promotional activities undertaken, Canadian companies and some staff at missions report that the mandate of the Counsellor is unclear.

Finding 13:

Over the three years since its establishment, the Office has yet to achieve a sufficient level of buy-in among key stakeholders and can be more effective in providing a credible dispute resolution mechanism.

Finding 14:

Although some stakeholders have suggested that the mandate of the CSR Counsellor be strengthened, neither the Office nor an Ombudsman would be able to compel companies to participate in a non-judicial dispute resolution mechanism for the implementation of voluntary CSR standards.

Finding 15:

The rationale behind the development of the Centre for Excellence (CfE) in CSR still holds. The CfE has made some progress in providing a web-based tool for communicating CSR best practices, but has further potential.

Finding 16:

The launch of Canada’s Strategy coincided with a period of fiscal restraint for the Government of Canada. Consequently, the level of resources devoted under the Strategy, both human and financial, has not been sufficient to fully support coordinated, long-term initiatives or achieve longer-term results.

Finding 17:

The lack of an implementation plan within DFATD has contributed to uneven awareness, understanding and promotion of the Strategy and the related CSR standards across the mission network.  There has been a sustained effort to promote the Strategy by mission staff, however, some officers reported only limited access to training on the Strategy or CSR-related issues in the extractive sector.

Finding 18:

The Strategy has led to the creation of some interdepartmental mechanisms to share information on CSR-related activities.  Implementation of the Strategy, however, could benefit from improved coordination among DFATD and other government departments.

Finding 19:

Creating a competitive advantage for Canadian companies is identified as the strategic outcome of the Strategy. However, the ability to assess the results achieved is limited by the absence of clear objectives, expected results and performance indicators.

Finding 20:

With the recent expansion of the OECD Guidelines for MNEs, there is considerable overlap between the mandates of the Office of the CSR Counsellor and Canada’s OECD National Contact Point.  In both cases, the level of resources allocated has not been sufficient to support a robust dispute resolution function, or to allow for handling an increased caseload of CSR-related complaints or requests for assistance.