Anti-Corruption, CSR, & the Law in Resource Extraction: Making the Connections For presentation at the “Laws, Institutions & Challenges of Good Governance” Session of the ISID Resource Extraction Conference, McGill University, Montreal, Quebec By Dr. Kernaghan Webb Transparency International-Canada Bd Member, CSR Centre for Excellence Exec Cttee Member, CBSR Bd Member, CBERN member, UN Global Compact Special Advisor re: ISO Associate Professor Department of Law and Business Ted Rogers School of Management Director, Ryerson Institute for Study of CSR Ryerson University March 30, 2012

Resource Sector CSR issues, risks, challenges NGO campaigns Blockades Strikes Referendums Bad publicity Violence Expropriation Distinctive situation of indigenous groups Re-settlement Worker unrest Higher insurance premiums Lawsuits & liability Evolving standards De-listing from Sustainability Indices Contractor/supply chain problems Corrupt governments Political instability Shareholder actions

SR defined (ISO 26000) the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that: –Contributes to sustainable development, health and the welfare of society; –Takes into account the expectations of stakeholders; –Is in compliance with applicable law and consistent with international norms of behaviour; and –Is integrated throughout the organization and practiced in its relationships (e.g., supply chain partners) benefits: firms with good reputations may more quickly and easily gain approval of communities and governments, and investor/public support (social licence to operate) CSR represents the business contribution to SD

The corruption challenge Multi-level, multi-agency government and community approvals are an integral part of resource extraction projects CSR = winning over the hearts and minds of affected stakeholders re: value of project Especially in developing countries, there are significant problems with poverty, inadequate capacity at the government level, lack of respect for the rule of law, and acceptance of the practice of bribes represent significant challenges for project proponents The “Blackfire” example 4

The sustainable governance “ecosystem” approach The environmental, social and economic problems we face in the 21 st century can only be effectively addressed through a systematic, coordinated use of rule instruments, institutions, and processes, employed by a combination of state, private sector and civil society actors (Webb, 2005; Webb, 2011). –Both collaboration and competition/check-balance dimensions In effect, what is needed is a comprehensive multi-variate ecosystem approach to addressing the problem (Sagebien, 2011; Webb, 2005) 5

6 Governance: what is it? The sum of the many ways that individuals, institutions (public and private), manage their common affairs –Corporate governance is that subset of “governance” that pertains to private enterprises Responsibilization: when actors accept and internalize obligations (Foucault)

7 Sub-optimal governing conditions Increasingly complex societal problems (environmental, social, economic) that defy easy solutions There are rarely enough government financial resources or inspectors, or sufficiently up-to-date and rigorous standards, to fully and properly address a given public policy problem Public wants and expects full protections Public wants no new taxes, tax reductions Public wants growing economy, which entails creating environment attractive to business Business wants least burdensome regulatory approach which does not put them at a competitive disadvantage Civil society is suspicious of government and private sector Political priorities/willpower changes, budgets come & go

8 More sub-optimal governing realities Roller coaster economies Unpredictable, fast moving situations, growing importance of international factors Strong economic inter-dependence Low levels of trust of governments and others Rapidly changing technologies forcing public policy changes In Canada, considerably more decentralized, devolved federal-provincial-municipal governing context than ever before In developing countries, limits of state capacity particularly apparent

Rule instruments International Treaties/Conventions –Extra-territoriality International standards, principles, guidelines (UNGC, GRI, ISO 9001, 14001, 26000, IFC Performance Standards, Equator Principles, TI Anti-corruption principles, ICMM) Domestic laws (enforcement) and non-law instruments/approaches (MAC, PDAC) Disclosure laws (Dodd Frank) 9

Actors Inter-governmental (e.g., UN, OECD, OAS, EITI) Governments Private Sector (ICMM, MAC, PDAC) Civil society (Transparency International, Revenue Watch, Publish What You Pay) 10

Institutions and Processes Courts investigations Anti-corruption integrity pacts Industry association reviews Reports on expenditures 11

Putting it together The combination of international and domestic instruments, actors, processes and institutions creates a sustainable governance ecosystem that surrounds and permeates the corruption issue Need for both collaboration (partnerships) and institutionally “designed in” competition/check and balance functions 12

13 Thank you! Questions and comments are welcome: Dr. Kernaghan Webb Department of Law and Business Ted Rogers School of Management Ryerson University