Remarks by: Jim McArdle
Senior Vice-President, Legal Services & Secretary
Montreal - October 1, 2009 

Welcome everyone.  As you heard, part of my role at EDC is as the executive responsible for Corporate Social Responsibility (CSR). 

I have been involved with CSR for many years, first as a transaction lawyer working on financing of projects, and now as an Executive at the policy level-- who plays a role in the final decision on tough situations.

This morning you heard about two important aspects of CSR: the business case for integrating CSR into your operations; and how CSR adds value from the customer point of view.

These are the two biggest drivers of CSR:  Is it good for the bottom line?  And does the customer and society expect it of you?

EDC has witnessed companies around the globe sustaining their success by doing business responsibly.  We are convinced that acting responsibly is good for business.  I’m hoping today to give you a sense of EDC, how CSR evolved at EDC, and how we have integrated CSR into our business.

Then I’ll close by noting where we see CSR going at EDC in the near future.

First let me give you a brief overview of EDC:

EDC is Canada’s official export credit agency, in operation for 65 years.  Our mandate is to help Canadian companies develop and expand their exports and investments abroad.  CSR was not specifically named in our mandate, and you will soon see how that has evolved.

As a Crown corporation, EDC operates at arm’s length from the government and is financially self-sufficient. We operate much like a commercial bank, providing lending and insurance services.  These range from accounts receivables insurance, political risk insurance and contract bonding insurance and guarantees to direct lending and equity investments.   In 2008, for example, we facilitated some $86 billion in Canadian trade and investments abroad, for more than 8,000 customers in some 180 countries. 

This year, owing to the recession, the government temporarily expanded our mandate to allow us to provide financial services to Canadian companies doing business in the domestic market as well.  This is just one sign of our strong financial capacity.  This capacity enables us to influence borrowers, by making our support contingent on certain conditions, such as a project sponsor mitigating environmental risks, creating positive social impacts, and refraining from bribery and corruption. In addition, we have to balance these conditions in the context of our mandate, to support Canadian exporters, which creates economic benefits for all of us.

Over time, we have developed a strong CSR commitment and program.  It has been a process of evolution over the last decade or more.

As I previously noted, we are an export credit agency or ECA.  Many other countries have an ECA as well; each seeking to promote exports from its country.  This could lead ECAs to try to tip the balance in favour of their exporters, by using uncompetitive or unfair advantages.  Fortunately, there are agreements through the Organization for Economic Cooperation and Development (OECD) to prevent this and ensure a level playing field by ECAs.  For example, there are agreements on price-setting, premiums and interest rates related to the support ECAs provide.

These arrangements eventually expanded to other areas, notably the environment and anti-corruption, leading to the Common Approaches on the Environment and an Action Statement on Bribery. More recently, the OECD has started to focus on social issues and human rights.  All ECAs , including EDC, agree to meet the requirements and standards that have evolved over time.

At EDC, CSR is part of our culture.  Starting with a policy on basic ethics, in the late 1990s, we created our Code of Business Ethics and Code of Conduct.  I’m proud that EDC was the first Crown to introduce a formal Code of Conduct.  It received Board approval and applies to all Board members, senior management and employees. 

The Code covers issues including ethical conduct, conflicts of interest, bribery and corruption, transparency and confidentiality, environment and human rights.  Employees have to sign-off on the Code every year.  Today, we also have an on-line training tool, an Ethics Week and case studies to keep the Code top of mind.  This is especially important because of the international nature of our business.

The Code also represents the first time the Board formally became involved in CSR issues. In 2000, we presented to the Board the concept of CSR as one of our operating principles, integrated into our business.  Since then these principles have evolved in several ways:  we developed an Environmental Review Directive (ERD), Environmental Policy, Disclosure Policy, and, most recently, a Human Rights Statement, all reviewed by the Board.

Indeed, Canada’s Conference Board counts Board oversight of CSR issues among the best practices in CSR.  We have continued to move in this direction: our Board held discussions on CSR in June 2008, reviewed a CSR paper in May 2009, held a strategic session in June 2009 which covered this topic and we are planning further Board engagement in 2010.

In 2000, we also started to realize that it would be helpful to have an external advisory body, to provide advice to senior management as we evolved our CSR practices. The following year, we created the CSR Advisory Council, originally six, now nine eminent Canadians--highly experienced professionals with expertise in various aspects of CSR.

I am pleased to say that Jean-Marie Toulouse, well known at HEC, was the first Chair of our Council and held that role for many years. And Jean-Louis Roy of Montreal, former president of Rights and Democracy, is currently on our Council.

In 2003, we set forth our CSR Statement of Commitment.  This says:  “We carry out our mandate in a socially responsible manner consistent with our corporate values. “ You will recall that our mandate, which was developed in 1993 and is part of our enabling statute, did not directly deal with CSR. We believe it’s important to clearly state how CSR integrates with our mandate; that’s why we created our CSR Statement of Commitment.

Today, CSR is a full operating principle at EDC, not just a special program.  It defines how we do our business using five categories or pillars:

Business Ethics includes our Codes and our anti-corruption program, anti-terrorism guidelines, reputation risk assessments, human rights statement and the Government’s personal integrity directive.

Environment: our obligations comprise adhering to the OECD Common Approaches, having an environmental assessment directive (which became a legal requirement in Canada in 2001), and submitting to audits of our environmental assessment regime by the Office of the Auditor General. We also adopted the Equator Principles in 2007.  Most major banks around the world have signed onto these voluntary financial industry benchmarks for assessing and managing social and environmental risk in project financing.  EDC is working to ensure the financial industry globally is using consistent guidelines.

EDC also developed its own Environmental Policy and has an Environmental Advisory Services team to ensure projects meet international standards and, where possible, to help them mitigate potential environmental hazards.  We do not support projects that cannot meet or adapt to internationally-accepted standards. 

Transparency is largely achieved through our Disclosure Policy where our financing of environmentally-sensitive projects is reported, prior to our commitment.  We also must balance the needs of keeping the Canadian public informed and respecting customer confidentiality.

Organizational Climate encompasses employee training, career development, employee opinion surveys and other elements that stimulate employee performance and development.

In 2009, EDC was named one of Canada’s Top 100 Employer for the ninth consecutive year. 

Finally, Community Investment covers our Donations Policy, Day of Caring, Partnership with CARE Canada, Youth Education Program and other community initiatives.

CSR at EDC today is fully integrated into our decision-making process alongside credit analysis, our mandate and assessment of Canadian benefits.  We have the policies, procedures, training and teams to ensure this happens—from our Political Risk Assessment and Environmental Advisory Services to Corporate Responsibility and Legal Services.

EDC has responsibilities to many stakeholders – our shareholder--the Government of Canada, customers, employees, financial partners, NGOs and the public at large. Each of these stakeholders has a view on how EDC should act in fulfilling its mandate.  Engaging these stakeholders and considering their viewpoints in business planning is often referred to today as a “social license.”

At EDC, we believe in the concept of a social license to operate.  Given our broad array of stakeholders, however, sometimes it’s tough to know exactly the terms of that license, and no company can satisfy all stakeholders all the time.  So we must state the terms of our involvement clearly to them, be prepared to defend our actions, and where appropriate, also be prepared to adapt and evolve.  We continually strive to find the right balance in all we do – to ensure we maintain our social license.

To conclude, I will touch on the future of CSR at EDC.

• We benchmark ourselves regularly against what other financial institutions, government agencies and other corporations are doing in the field of CSR and new norms that may be developing;
• The Auditor General conducts regular environmental audits of our standards and emerging CSR procedures and practices;
• Our CSR Advisory Council keeps us abreast of the latest concerns and approaches in CSR; and 
• Our executives discuss our CSR practices and direction on a regular basis to ensure we are where we need and want to be.

At this point, we see four key evolving areas:

Stakeholder engagement, for one, is a growing area of focus for us.  We recently started organizing roundtables on high-risk projects in challenging areas with a cross-section of interested participants.  For example, our first roundtable was focused on the Democratic Republic of Congo (DRC). 

The purpose was to examine the possibility for companies and financiers to do business in that post-conflict country in a way which meets accepted CSR standards. We attracted broad participation from companies, financiers, NGOs, government and the local community.  We learned a lot from each other and it enabled us to set criteria related to supporting development in the DRC in the future.  This includes identifying what a company would have to do to work in that environment, how to involve NGOs, how to distribute certain royalties locally, and how to engage and build a solid relationship with the local community.

We are also reviewing and developing our practices in three other CSR areas:

In transparency, we are examining how we disclose our support for projects and their environmental aspects and how to enhance our CSR reporting.

On the issue of climate change, we are consulting with many stakeholders on the different aspects involved and on what kind of positive role EDC could play.

In human rights, we are engaged with Dr. John Ruggie, the UN Special Representative for Business and Human Rights, to determine how we can work with companies to support their risk management in this area.

All these examples are signs that public expectations continue to evolve and so does our approach to CSR.

Thank you for this opportunity – I look forward to your questions.