Remarks by: Jim McArdle
Senior Vice-President, Legal Services & Secretary
To the: Standing Committee on Foreign Affairs and International Development
Ottawa - October 27, 2009 

Thank you Mr. Chairman, and thank you to the Members of the Committee for inviting me to speak to you today about Bill C-300 and the impact it would have on the Canadian companies EDC serves if we were to be included in it.

I am here today both as Senior Vice President for Legal Services and as the executive responsible for CSR. As such, I have worked on CSR issues both on the policy level as well as in the context of the transactions I have worked on as a lawyer.

As I’m sure you already know, EDC provides financing, insurance and risk management solutions to help Canadian exporters and investors succeed in the global marketplace.  Our mandate is to support and develop Canada’s trade and Canadian capacity to engage in that trade and to respond to international business opportunities.

In this way, we work to ensure that Canadians have a level playing field when competing against exporters from other countries.

In our opinion, including EDC in Bill C-300 would put Canadian companies at a significant disadvantage to exporters from other countries, and will inhibit EDC’s ability to support Canadian companies.

Let me state clearly that EDC supports the intent of Bill C-300 and shares the belief that Canadian companies should conduct their business in a socially responsible manner no matter where in the world they operate.

However, we believe that the best way to both promote human rights and ethical conduct, and to improve environmental conditions related to projects around the world, is by working with companies to proactively help them build their capacity to operate in a responsible manner. And where there are well established and clear international standards, we hold companies to these standards in often challenging environments.

I think it is important to note that our experience confirms that the international community is still struggling with how companies can integrate human rights issues into daily global business practices and currently no internationally recognized human rights standards for financial institutions exist.

However EDC is a very active participant in the international dialogue. For example, EDC is a main sponsor to, and I will be a participant in, an expert meeting next week with John Ruggie, Special Representative of the UN Secretary General on Business and Human Rights, entitled “Opportunities and challenges of using corporate law to encourage Corporations to Respect Human Rights.” 

At EDC, leading edge Corporate Social Responsibility policies and procedures guide the Corporation’s activities. Over the past decade, we have worked hard to develop one of the world’s most comprehensive CSR programs among export credit agencies.

EDC has been evolving its CSR standards consistent with international best practices. Our Corporation actively supports a number of international commitments, including the Equator Principles, to which only two other export credit agencies have signed. Being an EDC customer means that your transaction will be seen as having met some of the highest standards applied by any export credit agency.

For our corporation, corporate social responsibility isn’t about checking boxes, it is an integral part of how we operate and is an ongoing process with our customers. EDC conducts CSR assessments when our support is in relation to sensitive markets or projects to ensure the project and company in question meets our CSR requirements. If there are areas which we believe a company is not up to our requirements, EDC gives direction and advice on how they should improve. If a company does not meet our strong requirements, they will not receive EDC support.

By engaging with companies in this way, EDC is able to provide a balanced approach to CSR: to help build the CSR capacity of Canadian companies and ensure they meet the internationally recognized standards we apply, while providing the financing and insurance solutions they need to succeed on the international stage.

We believe the standards Bill C-300 seeks to put in place would severely jeopardize our opportunities to engage in this way.

By including EDC in this bill and imposing compliance standards –several of which are, as noted earlier, still in the process of being defined and agreed upon by the international community – EDC would be required to exit a relationship with any Canadian company the moment a CSR violation has been determined. This approach has at least two negative impacts. First it restricts us from working with the Canadian company to remedy any issue and improve their standards; and second, we believe it will mean they won’t access capital from EDC in the first place.

We believe that the uncertainty caused by the application of this bill would also impact other lenders’ willingness to provide financial intermediation. If this happens, the void left by Canadian companies will be more likely to be filled by other international players with less regard for CSR. 

Let me explain how this would occur. According to the wording of this bill, if a determination is made that a company has breached the guidelines during the period of loan repayment or insurance policy, EDC would be required by Bill C-300 to terminate that loan or policy, whether or not EDC has the right to do so under the contract.  Therefore we would have no ability to work with the company and remedy the situation in question.

Secondly, EDC cannot allow itself to be in the position of being required by Bill C-300 to terminate our support without having the right to do so under the contract. At the same time, our experience tells us that Canadian companies, as well as other lenders, would be unwilling to accept such an EDC right in the contract as its application is out of their control.

This means that if Bill C-300 becomes law, EDC’s ability to provide lending and insurance, as well as apply our rigorous CSR standards to projects and companies in the extractive sector will be seriously compromised. And given that the bill captures all business activity with a connection to the extractive sector, regardless of size or product, all Canadian businesses along the supply chain would be negatively impacted by EDC’s forced departure from the market.

The significance of this departure would be deeply felt here in Canada.  In 2008, EDC facilitated $27.4 billion of exports and investments in the extractive sector. EDC’s support in this sector helped generate $21.4 billion in Canadian GDP and sustain 139,000 Canadian jobs in communities across the country.

EDC enables Canada to be a leader on CSR without tilting the playing field against Canadian companies. What we do at EDC is reviewed and regularly benchmarked. To impose standards so out of step with the rest of the world would not improve CSR. It would only hurt Canadian companies and take them out of the game.

We believe there is a difference between being a leader and a cheerleader.  A leader is on the playing field, working with the team and using their skills and resources to reach their goal.  A cheerleader is on the sidelines, hoping for the best. 

Today EDC is on the playing field, working with Canadian companies, influencing them and building their CSR capacity.  If this Bill becomes law, we believe our opportunities to be on the on the field would be limited. 

Instead, we – Canadian companies and EDC - would be on the sidelines hoping that those other companies who remain in the market do the right thing from a CSR perspective.

Thank you. I would be happy to take your questions.