Remarks by: Jim McArdle
Senior Vice-President, Legal Services & Secretary
To the: EDC-PDAC CSR Workshop
Toronto - March 6, 2011
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Welcome to this workshop on managing social and human rights issues.
This event has become a tradition at PDAC –ever since it was launched in 2005 by EDC and various supporting organizations.
We have received good feedback from mining companies over the years; they want to hear what lenders are looking for when we review mining projects and what their peers are doing well.
The continuity of this event also demonstrates the importance we all place on making mining a more sustainable and respected activity around the world.
We all know that respect has to be earned—year by year, country by country, project by project.
This message has come out loud and clear over past couple of years.
Even one environmental accident or breach of human rights can undermine a whole industry and countless years of good work.
That’s one reason why it is everyone’s responsibility in this sector to ensure we are all keeping up with evolving domestic and international CSR standards.
The other reason—the simple and practical one—is that it is good for business, if you all want to survive and thrive over the long-run.
Looking at where we are today, mining companies and their engineering consultants are becoming more sophisticated at reducing the environmental impacts of projects. The rules of the game are much clearer than they ever were, which also helps.
The bigger challenge -- our topic today -- is ensuring that you can manage the social and human rights issues involved in your business to mitigate the possible impacts of your operations on the surrounding communities.
These aspects, together with the environmental aspects, are what determine if you have a true “social license” to operate.
Many companies are beginning to recognize the social and human rights aspects, but there is always a gap between “recognizing” and “doing,” along with many questions about “what” and “how much” needs to be done.
I’ll give you a brief overview of why this matters to lenders like EDC and what we are looking for in the social arena, to help launch some of the discussions today.
This is a familiar subject for me, since I have been working on the front lines of Corporate Social Responsibility for a large part of my career as corporate counsel at EDC.
- Currently, I’m responsible for my organization’s CSR policies and procedures.
- I apply social responsibility principles to everyday business decisions.
- I’ve seen major advances in how companies meet public expectations.
One thing that is clear is that CSR is full of grey areas, subjective interpretations, things you cannot predict, quantify, or apply a scientific model.
That’s why we’re here today.
How does financing fit in?
Mining projects obviously need large amounts of capital to develop or expand. Getting that capital is even more challenging today, in the aftermath of the credit crunch.
As many of you know, EDC works in partnership with all types of lenders– other export credit agencies, commercial banks and insurance companies around the world.
- We add capacity and increase your borrowing power.
- We participate in syndicated loans, credit and political insurance, bonding guarantees and more.
The point is: EDC and our financial partners have an important influence on a large portion of international trade and investment.
As such, all companies should be aware that if they want to borrow from a reputable financial organization, they will need to comply with international standards or guidelines, not just on environmental impacts, but now also on social performance.
These guidelines are supported by international agreements and principles, namely:
- The Common Approaches to the Environment, for ECAs; and
- The Equator Principles: 80 per cent of the project finance market, including banks and ECAs, adheres.
- My colleague Deborah Berger, Director of EDC’s Environmental Advisory Services, will examine the latest review of these principles this afternoon.
Lenders are focused on these issues because they know that both lenders and project sponsors alike need to have a “social license” to operate successfully – this will facilitate resource development, so that our countries, our businesses and our trading partners derive benefits for years to come.
What’s new?
Most major public and private financial institutions apply the World Bank’s International Finance Corporation (IFC) Performance Standards on Social and Environmental Sustainability.
These Standards have evolved in recent years to include stronger social considerations:
- These include: resettlement practices, management of labour rights, working conditions, impacts on indigenous culture, community health, and safety and security issues.
- They were strengthened in 2006 and 2010—the latter to be released later this year.
- John Middleton of the IFC and Caleb Wall, a social specialist, will help you better understand the revisions and emerging trends this afternoon.
It is also critical to engage with stakeholders on major projects, including your customers, affected communities and civil society groups.
This not only helps you understand your stakeholders’ needs and concerns, but also lets them understand your goals and constraints, and find common ground.
The guide posts are most obscure when human rights are involved:
- EDC is supporting and cooperating with Dr. John Ruggie, the UN Special Representative for Business and Human Rights.
- Dr. Ruggie’s “Protect, Respect, Remedy” framework sets out human rights expectations for governments and for companies, which have been welcomed by civil society and industry alike.
- You can hear more about the latest human rights trends later today from EDC’s Chief CSR Advisor Signi Schneider.
For now, community engagement, experience and good judgment remain the key elements in decision-making.
What does all this mean?
If you need international financing for a project, you will be held to high social responsibility standards.
Companies need to comply with the standards under which financial institutions operate.
Social risks need to be integrated into the risk management process. They have to become as instinctive as managing the balance sheet.
Include social impact assessments early in project planning.
We understand that many junior mining companies don’t always have the staffing and expertise to manage social impacts.
Therefore, don’t hesitate to look to your industry associations and expert groups—PDAC, MAC or ICMM—to help you better understand the guidelines and requirements.
Most of all: Involve the communities where projects will take place at the earliest planning stage and throughout the project life cycle. Adjust plans to address community concerns.
If companies don’t voluntarily address social issues, legislation eventually will do so—we have already been forewarned by Bill C-300.
The best argument is this: Having solid CSR practices and a strong “Social licence” is a competitive advantage that enhances your business survival and your company’s brand.
Thank you for your attention.