(Also published in The Hill Times Opinion section on November 28, 2018)

By: Benoit Daignault, President and CEO at EDC

Anyone listening to the news knows we live in a climate of high expectations. Corporations, governments, financial institutions, and companies of all sizes are under the microscope in terms of whether they conduct business in a responsible way. Where once corporate social responsibility (CSR) was a nice-to-have, it’s now an imperative.

However, responsible business practices are more than just doing the right thing. They are core to a company’s business performance. The Responsible Investment Association cites research showing more than 2,000 studies that suggest a positive correlation between CSR and financial performance. Considering both elements, ethical and financial, there is a global expectation (and rightfully so) that business is done with the interest of the broader society in mind.

This adds another important layer to the already complex nature of international trade. As a financial institution dedicated to supporting and developing Canadian exports, Export Development Canada (EDC) has a responsibility to ensure that all of its risk management practices – both for credit and for non-credit risks – are robust and equip the corporation to make sound decisions about the business in which it engages.

Of course, these are just words. The question is what does this look like in practice? How do we operate in this space in a way that is responsible and in a way that supports our mandate?

It starts with recognized standards that are used globally. EDC’s activities are aligned with and informed by all of Canada’s international obligations, including the ones related to CSR and responsible business practices as well as all relevant guidelines at the Organisation for Economic Co-operation and Development (OECD) for Export Credit Agencies. It also includes, depending on the nature of transaction, the appropriate International Finance Corporation performance standards and the application of the Equator Principles. This approach is further supported by regular engagement with Civil Society and industry stakeholders about emerging best practices as well as our recent commitment to the Task Force on Climate-Related Financial Disclosures.

Using those rigorous standards and due diligence practices, we make informed decisions to engage with companies in Canada and around the world. Some might say one of the safest ways to avoid CSR risk is to simply never work with a company who has had issues in the past. At first glance that would seemingly make good sense. However, based on our many years of experience working through all facets of due diligence and risk management, we’ve come to see that that view can be short-sighted. Why? Because a binary “yes or no” limits the opportunity for dialogue, engagement and a better outcome.

We see a tremendous degree of value in working with companies to inform and support improvements in their practices. We are not unique in this perspective - the United Nations Guiding principles on business and human rights suggests the same approach: working with businesses to ensure they know what their adverse impacts are and can show what is being done to avoid and address such impacts.

Companies that go through a significant CSR challenge have a choice: improve and take the necessary steps to build better practices, or, opt not to change. Over time, the latter option ceases to be sustainable and these companies suffer. In my experience, most, after having a hard and honest look at their practices, are very motivated to exceed expectations by cleaning up and often ending up with best-in-class programs.

EDC can play a role in supporting this path to improvement by leveraging its financial relationship to influence the company to remain committed to improve their practices. Developing positive relationships combined with a financial incentive and supported by regular monitoring and engagement create the right conditions. Let me say however that in practice, we’ve experienced some cases where this has worked and some cases where it hasn’t.

For example, EDC previously entered into a financing agreement with a company in Asia with a view of influencing the CSR practices of its parent company, while opening opportunities for Canadian companies in an important and growing market. Subsequent events and assessments concluded that the parent company hadn’t made enough progress to improve their business practices and as a result we decided to exit the relationship.

Getting it right has been a major preoccupation for EDC. Learning how to better manage these decisions in a world with a rapidly evolving risk landscape is one reason we’ve undertaken a project to enhance our risk management practices. At the heart of it is creating a business culture that has a mature understanding of risk and our tolerances for it. We’re building a framework where managing risk isn’t assigned to one group or team; it’s owned by everyone in the company starting the discussions from the top down.

Canada has an aggressive trade agenda. As much as we like to think of ourselves as always having been a trading nation, our future depends on being an even stronger one. Core to this agenda is the need to diversify; to encourage Canadian companies to look beyond traditional markets and to see themselves as being able to operate in higher risk environments.

Our job is to stay on top of changing global best practices, and deliver our best effort to Canadian exporters, of all size, so they feel safe to take on the world.

About EDC

Export Development Canada (EDC) is a financial Crown corporation dedicated to helping Canadian businesses make an impact at home and abroad. EDC has the financial products and knowledge Canadian companies need to confidently enter new markets, reduce financial risk and grow their business as they go from local to global. Together, EDC and Canadian companies are building a more prosperous, stronger and sustainable economy for all Canadians.

For more information and to learn how we can help your company, call us at 1-800-229-0575 or visit www.edc.ca.