ENCOURAGING CORPORATE SOCIAL RESPONSIBILITY (CSR) IN ALBERTA

Notes from Panel Presentation by Hon. David Kilgour

Second Annual MP Policy Dialogue

Naivasha, Kenya

September 20-22nd, 2004

This dialogue could not have come at a more crucial time—when countries like Canada find themselves in a position where our citizens repeatedly demand higher, more accountable levels of corporate and public governance. In Kenya’s case, it is a transitional time, led by a democratic movement towards consensus building, anti-corruption, and the restoration of public institutions.

One of the main goals of this conference is to find practical ways that we, as parliamentarians, can create an environment that fosters CSR initiatives, and make them attractive to our entrepreneurial communities. What better way to do so than to look at successes in each of our respective regions?

 In recent years, CSR has become a vital part of a comprehensive approach to business success, particularly in light of recent scandals that have undermined trust in business leadership. As global pressures continue to force companies to think deeply about their societal impact, the implementation of CSR will continue to grow as an issue. This basic observation holds the key to creating an environment that is hospitable to change and improvement. One practical way to ensure CSR is through strategies in which both corporations and other stakeholders benefit from  finding a balance between corporate and community interests.

This panel is to offer some explanations and examples of initiatives in the key areas of CSR strategies. Governing and management systems, human resource management, community investment and involvement, environment, health and safety and human rights are among them.

I’ll be highlighting the steps that one company is taking to manage its CSR performance in Alberta, with the hope that these examples can be used to assess performance abroad.

Whether it be environmental activism, consumers exercising their purchasing power to voice concerns over ethically responsible production and trade, or pressure from NGOs and local governments, it is evident that these pressures have changed the nature of the discussion of CSR. It is no longer just a philanthropic, humanist, or environmental debate, but also a discussion of new, “win-win” business policies.

Case Study-Syncrude

Industries such as mining, energy, forestry and banking have probably responded the most to stakeholder demands for CSR practices because they are subject to intense political and regulational scrutiny. My case study explores initiatives made by Syncrude, a crude oil-producing company operating in the oil sands of north-eastern Alberta.

Syncrude has shown CSR leadership in a number of fields:

1)  It has developed a number of new technologies that minimize the impact of the operation on the environment. One example is the Tailings Oil Recovery unit, a project it designed and has since sold to other companies, which increases the amount of bitumen soil recovered in the extraction process, thus decreasing the size of the extraction mine.

2) Ten years before construction began, Syncrude provided studies demonstrating plans to minimize the environmental impact. Today, it has a comparatively large staff to implement protective measures and ensure that federal and provincial environmental legislation and regulations are met or surpassed. Syncrude is one of a few companies that has since inception always met or surpassed all environmental standards. Whether these standards are high enough is another debate we could further pursue.

3) Syncrude’s long-term plans are unique. They call for the restoring of the land to a biologically sustainable state that has a productive capability at least equal to its condition before mining operations began. Syncrude spends more than $7-million a year rebuilding land disturbed by the surfaces mines, completely reconstructing the soil for future forestry, wildlife or recreation projects. One such project, which oversaw the reintroduction of endangered animals to the area, was done in cooperation with the Fort Mackay First Nation and proved to be highly successful.

4)  CSR must include harmonious structural relationships between stakeholders and corporations; Syncrude has made significant steps to promote this dialogue. It is a member of Alberta Ecotrust, a unique cooperative effort between major corporations and environmental organizations that provide financial and technical support for community-based environmental programs. It is a founding member of the Cumulative Environmental Management Association, the Regional Health Integration Coordination Committee, the Oil Sand Mining End Land Use Committee, the Regional Socio-Economic Forum, the Aboriginal Development Program, and the Regional Aquatic Monitoring Program.

5)  Syncrude leads the field in health initiatives, having donated generously to the Northern Lights Regional Health Centre and the Edmonton’s Glenrose Hospital. It operates extensive employee community volunteer programs and sponsor educational grants.

6) Its relationship with local Aboriginal communities is exemplary. As Canada’s largest industrial employer of Aboriginals, a comprehensive dialogue was implemented from the beginning. Recognizing that the Aboriginal people in area would have a stake in the company, and that local talent and labour would be vital to the mine, Syncrude established a Native affairs department, made up of administrators, trainers, job and family counsellors and Aboriginal business leaders to foster mutual cultural understanding and oversee the funding of education and community development programs in the Aboriginal communities. In 2002, $82-million was spent with local Aboriginal companies and contractors.

Clearly, Syncrude has found a way to balance its own needs as a profitable business with some of the needs and demands of the environment and communities in which it operates. To quote a Conference Board of Canada report on CSR, Syncrude is finding ways to “reap the benefits of CSR by understanding the scope of (its) societal footprint.”  This is the key to promoting successful CSR initiatives; taking what might be seen as business risk and finding the opportunity in it.

 It should be made clear why a corporation would invest in this way.  Though company rhetoric may say they are motivated by a “responsibility as good corporate citizens and a desire to be a good neighbour,” it also makes sense that they help to develop and sustain a sustainable environment and a healthy pool of employees. The key, then, is this intersection; the intersection at which company needs and community needs meet and are mutually beneficial—regardless of the motivations.

Creating Motivation for CSR Initiatives

In a wider sense, we can encourage CSR initiatives by helping Canadian corporations identify the matters that are most relevant to their operations. By pinpointing these, we establish the motivation for implementation.

For example, in the area of competitiveness and market positioning, a 2002 study showed that 54% of Canadians said that they translated perceived social irresponsibility into consumer action. What this translates into is new waves of consumerism, whereby, for example, ethical and/or “green” standards would create lucrative new markets for companies which implement the environmental aspects of CSR. 

In the area of brand management and reputation, CSR accounts for over 25% of the “image and reputation” facet of customer satisfaction. Studies have shown that improving the public perception of a company’s CSR activities by 1% results in a 0.1% increase in their retail customer satisfaction figures. From an environmental angle, increased energy efficiency and “green” alternatives to waste management and IT outfitting can lead to large savings.

This illustrates a concrete way in which parliamentarians can support the movement:  pushing for laws that benefit such initiatives. Some examples; increasing recycling and energy- reduction incentives, creating motivations for agricultural producers to use more environmentally sound practices, or grow organic, by levying the regulation fees, and by rewarding community investment and transparency reports.

Transparency and Stakeholder Consultation

Transparency and stakeholder consultations are also key issues to be dealt with as part of a holistic CSR strategy. If one thing has become clear in regards to recent high profile corruption, theft and bribery scandals in Canada and the U.S., it is that citizens and consumers increasingly demand more transparency and accountability in both the private and public sectors. Stakeholders are calling for companies to report on and measure their performance. Regulators will continue to ask for more transparency in corporate management policies and environmental risks and liabilities. This movement should be encouraged, as it will provide the impetus for change, forcing businesses to disclose more information. We can also help to bolster interest in CSR in the financial community. Publicly traded companies in Canada that choose to integrate stakeholder consideration into planning and operations should be able to use their CSR “performance” to gain a competitive advantage.

As socially responsible investors and researchers continue to draw links between CSR and financial performance, financial analysts will start to look at social responsibility as a key aspect of financial analysis. This is what we want to see happen: creating an enabling environment in which CSR is not just required, or regulated by codes, but rather  is seen as being beneficial to every corporation.

Alberta Heritage Savings Trust Fund

We couldn’t have a discussion of innovative examples of CSR and sound community investment in Alberta without mentioning the Alberta Heritage Savings Trust Fund. Passed in 1976, the Trust Fund Act set out to manage and invest savings from non-renewable resources in Alberta and use the savings to fund provincial programs.

The fund operates under three objectives: to save for the future, to strengthen or diversify the economy, and to improve the quality of life of Albertans. During 1976-77, 30% of the non-renewable resource revenue received by the Government of Alberta from 1976 to 1977 (over $620-million) went to the Heritage Fund.

The investment income the fund generates is transferred to the province’s main operating fund, which helps pay for various programs. Over the past 28 years, more than $28-mllion has been spent on programs in areas such as health care, education, infrastructure, debt reduction and social programs.

A further $3.4-billion was invested in capital projects aimed at providing ongoing economic and social benefits for Albertans, among them, the Alberta Heritage Scholarship Fund and the Mackenzie Health Sciences Centre in Edmonton and Kananaskis.

This is another example of ways in which we, as parliamentarians, can not only promote CSR, but play keys roles in implementing it. Resource-rich countries like Canada should be looking to funds like this one as examples of how to invest effectively in CSR, and how to implement them on a large scale.

Conclusion

In closing, I can’t overstate that although legislation and new codes and regulations may be necessary at first, the future of  effective and sustainable CSR lies in creating a balance and fostering both a social and political environment conducive to meaningful change. An environment whereby, (to use another quote from The Conference Board), “Balancing business opportunity with societal impact becomes a must for business success in the new century.”

Asante!

Thank you.