How not to legislate Corporate Social Responsibility

Today in Canada’s House of Commons, Bill C-571, a Private Member’s Bill (that is, a Bill proposed by a Member of Parliament, rather than the government), had its first reading.  Bill C-571, referred to as the Trade in Conflict Minerals Act, is intended to deal with corporate practices relating to the purchase of minerals from the Great Lakes Region of Africa (which includes Burundi, Rwanda, the Democratic Republic of the Congo, Uganda, Kenya, and Tanzania).

While the trade in so-called conflict minerals is an issue worth action, this Bill is not the answer.

First, let me describe what the Bill would do.

Bill C-571 would require companies to track the supply chain of any mineral that originates in the Great Lakes Region, from extraction to final use, before purchasing any such minerals.

Bill C-571 would also require companies to monitor transactions all along the supply chain to determine if any payments to illegal armed groups have occurred.  Companies would be required to avoid participating in any such transactions and to avoid purchasing any minerals in relation to which any payments to illegal armed groups were made.

The Bill would also require Canada’s CSR Counsellor for the Extractive Sector (a position established under the current government’s much-touted CSR strategy, Building the Canadian Advantage) to report to the government any Canadian company suspected of “not practicing corporate social responsibility” in the Great Lakes Region of Africa.

Despite any good intention, this Bill is unworkable.

There is no legal definition of corporate social responsibility in Canada.  Heck, we can hardly come up with an agreed upon definition among practitioners who’ve been working in this space for years!  So it’s not at all clear what standard the CSR Counsellor would use to determine if a Canadian company was or was not practicing CSR in Africa.  Moreover, there is no legal requirement for Canadian companies to report on CSR activities, so it is not clear what information the CSR Counsellor would use to make her determination, nor what, if any, process would exist for evaluating the accuracy and validity of the information.

The supply chain requirements are also fraught with difficulty.  For one thing, I’m not certain it would be possible for each company to establish a complete supply chain map; this would depend in part on where the Canadian company falls within that supply chain.  For example, an end-user will be better positioned to map the chain to final use than would a raw metals processor. More challenging, however, is the requirement to identify supply chain transactions that involve monetary payments to illegal armed groups.  These payments typically aren’t recorded, let alone reported.  It’s optimistic, perhaps naive, to expect a Canadian company to suss this out.

For comparison, have a look at the proposed Conflict Minerals Trade Act introduced in the US House of Representatives.  That hefty bill relies on government to map conflict zones and mines, and to provide guidance to companies in exercising due diligence to avoid conflict minerals.  While that legislation may not be without issues, it certainly offers up a more carefully thought out approach to the challenge of managing trade in conflict minerals.

The scant Trade in Conflict Minerals Act is a perfect example of how not to legislate Corporate Social Responsibility.  Not only is it fundamentally unworkable in its current form, but its weaknesses will detract from constructive public discourse on this important topic, and potentially delay any real substantive action by government.

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