At Risk: Litigation, Reputation and Violation of CSR Norms Jennifer L. Egsgard

What is CSR? Where to find CSR standards Risks of ignoring CSR standards Approaches to compliance TODAY

Evolving definition No longer refers simply to philanthropic efforts CSR addresses how corporations manage their economic, social and environmental impacts on various stakeholders WHAT IS CSR?

“Corporate social responsibility encompasses not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm.” - Harvard’s John F. Kennedy School of Government WHAT IS CSR?

Standards may be expressed though: International Conventions National laws Private contractual agreements Voluntary principles In some cases, expectations are becoming increasingly standardized WHAT STANDARDS APPLY?

Set out general and industry-specific standards Often non-binding but important expression of expectations for behaviour UN Guiding Principles on Business and Human Rights WHAT STANDARDS APPLY? INTERNATIONAL CONVENTIONS

Core statement: –“Business enterprises have a responsibility to respect all internationally recognized human rights. –This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved” UN GUIDING PRINCIPLES ON BUSINESS AND HUMAN RIGHTS

All rights, at a minimum as set out in: –International Bill of Human Rights Includes: Universal Declaration of Human Rights; International Covenant on Economic, Social and Cultural Rights; the International Covenant on Civil and Political Rights; and its 2 optional protocols –Principles concerning fundamental rights set out in the ILO Declaration on Fundamental Principles and Rights at Work UN GUIDING PRINCIPLES: WHAT RIGHTS ARE COMPANIES REQUIRED TO RESPECT?

Avoid causing or contributing to adverse human rights impacts through company activities Must address impacts when they occur Must seek to prevent or mitigate adverse impacts directly linked to company operations Must provide access to remedy UN GUIDING PRINCIPLES: HOW MUST COMPANIES RESPECT RIGHTS?

Policy commitment to respect rights Human rights due diligence process to identify, prevent and mitigate adverse human rights impacts; and Processes to remediate adverse human rights impacts caused or contributed to by the company UN GUIDING PRINCIPLES: STEPS REQUIRED TO RESPECT RIGHTS

Informed revisions or content of: –IFC Sustainability Framework –ISO standard –OECD Guidelines for Multinational Enterprises Government/industry group endorsement includes: –Government of Canada, Council of Europe, US, UK, PDAC and Intl. Council on Mining and Metals INTEGRATION AND ENDORSEMENT OF GUIDING PRINCIPLES

Increase in legislation in multiple jurisdictions aimed at encouraging socially responsible behaviour in respect of: –Anti-corruption –Conflict minerals –Ethical supply chains –Human rights in certain areas i.e. Myanmar These laws also set out CSR standards NATIONAL LEGISLATION

Reputational damage Loss of business opportunities Litigation Security risks Exclusion from business and financing opportunities Pressure from concerned shareholders RISKS OF IGNORING CSR STANDARDS

Reputational damage can lead to: –Boycotts - decreased market share and profitability –difficulty doing business with impacted groups Heightened public awareness of rights issues increases boycott risks today, including as a result of social media, NGO investigations, and increased understanding of corporate structures RISKS OF IGNORING CSR STANDARDS: REPUTATIONAL DAMAGE

Private self-regulatory efforts can disqualify companies from contracts in the absence of adequate CSR systems –Example: Wal-Mart seafood supplier suspended as a result of poor working conditions Laws can also restrict business opportunities for companies without CSR systems i.e. California RISKS OF IGNORING CSR STANDARDS: LOSS OF BUSINESS OPPORTUNITIES

Harmful impacts from company operations can lead to conflict with populations near operations – protests, labour strikes Can lead to: –Physical harm to individuals and to company operations –Legal risk –Large losses from disruption in operations RISKS OF IGNORING CSR STANDARDS: SOCIAL UNREST/SECURITY RISK

Increasing demands from institutional investors that businesses show compliance with CSR standards to obtain financing Example: International Finance Corporation’s Sustainability Framework has been updated to reflect Guiding Principles, compliance with which is a condition of IFC financing RISKS OF IGNORING CSR STANDARDS: DISQUALIFICATION FROM FINANCING

Transnational tort actions ongoing in Canada: –Choc v. Hudbay Minerals, 2013 ONSC 1414 –Adolfo Garcia v. Tahoe Resources Inc. –Araya v. Nevsun Resources Inc. RISKS OF IGNORING CSR STANDARDS: LITIGATION

Yaiguaje v. Chevron Corporation, 2013 ONCA 758 RISKS OF IGNORING CSR STANDARDS: LITIGATION

CSR strategies can no longer simply be philanthropic endeavors Must instead respond to emerging legal and other risks RISK MANAGEMENT & COMPLIANCE STRATEGIES

Guiding Principles provide that policy statements should: –Be approved by senior management –Be informed by relevant expertise –Set out human rights expectations Internal and external policies Should dovetail with existing policies re. CSR issues – i.e. corruption, privacy RISK MANAGEMENT STRATEGIES: POLICY STATEMENTS

Guiding Principles provide that due diligence should identify, prevent, mitigate and account for adverse human rights impacts Business advantages to due diligence Solicitor/client privilege DUE DILIGENCE

- Help clients understand definition and scope of affected rights - Interpretation under national and international law - Assessment of causal relationship - Drafting third party/supplier contracts DUE DILIGENCE – ROLE OF COUNSEL

Guiding Principles require businesses to cooperate in legitimate processes, including non-judicial grievance mechanisms, to remedy human rights grievances that they have caused or to which they have contributed Appropriate measures will vary Most difficult aspect of Guiding Principles REMEDIATION

CONCLUSION