August 18, 2005
Most Canadian Extractive Companies Behind the Curve on Human Rights Policies
by William Baue
Ethical Funds surveys Canadian energy and mining companies and finds less than a handful with
comprehensive human rights policies, management systems, and disclosure mechanisms.
International human rights law is changing faster than companies can keep up. In order to stay
ahead of the curve, companies should have comprehensive human rights policies implemented,
recommends a recent report on Canadian energy and mining companies conducted by Vancouver-based socially
responsible investment (SRI) firm Ethical Funds. However, a survey that
forms the basis of the report finds only a very few have taken this proactive step. Most companies
surveyed are therefore exposed to legal as well as financial and reputational risks from operating
in countries where human rights violations and violent conflict are endemic.
risks are relatively new," writes Ethical Funds Vice President for Sustainability Bob Walker in the
report, which is entitled Canadian Energy and Mining Companies: Navigating International
Humanitarian Law in the 21st Century. The International Legal Resources Centre (ILRC) provided legal expertise in the development of
the report. "The rapid evolution and increasingly energetic enforcement of international law
during the 1990s means that companies are exposed to legal risks that did not exist 15 years ago."
"Canadian companies without the safeguards to mitigate the risk are overly exposed to
human rights violations," adds Mr. Walker. "Energy and mining companies need to understand this
evolution and take steps to protect human rights and corporate interests."
To conduct the
survey, Ethical Funds first performed a global risk assessment of 152 countries. Looking for human
rights violations including crimes against humanity, war crimes, and genocide, Ethical Funds
identified nine "extreme-risk" countries and 25 "high-risk" countries. Information sources for the
assessment included the Transparency
International Corruption Perception
Index, the Freedom House Annual Survey of Political
Rights and Civil Liberties, and the Conflict Barometer from the
Heidelberg Institute on International Conflict Research (HIIK) of the University of Heidelberg.
Funds then surveyed the S&P/TSX Composite Index, finding 24 Canadian companies
active in six extreme-risk countries (including Colombia and Burma) and 11 high-risk countries
(including China, Indonesia, Nigeria, and Russia).
"In our view, four companies adequately
disclosed policies and management systems in 2004 compared to their peers--specific commitments and
disclosure practices overall need to improve and metrics need to evolve, especially in the areas of
free, prior, and informed consent and measuring direct and indirect economic benefits," Mr. Walker
These companies are Talisman Energy (ticker: TLM), Nexen (NXY), Enbridge (ENB), and Alcan (AL).
participating in a controversial bauxite mine and alumina refinery
project in India, with an environmental assessment expected this fall and a "go" or "no-go" project
decision early in 2006," said Mr. Walker.
A fifth company, Petro-Canada (PCZ), has a policy
in place but not a credible management system, according to Mr. Walker. Unlike other companies in
this same boat, Petro-Canada is actively working to remedy the situation
was inadequate last year, but we have been in dialogue with the company on this issue since October
2004 and, as of February 2005, we knew that system development and future reporting were underway,"
said Mr. Walker.
This year, Ethical Funds has begun asking more companies in its
portfolios to develop human rights policies and management systems and to disclose more information
on human rights to stakeholders.
The report provides the necessary contextualization,
sketching the international human right law landscape. The report looks back at how the Nuremberg
Military Tribunals and the Charter of the Military Tribunal for the Far East set precedent after
World War II on how international law would try human rights abuses. For example, the IG Farben case
(which tried the makers of Zyklon B, a delousing agent used by the Nazis in concentration camp gas
chambers) represents the first time corporate officers and directors were prosecuted of war crimes.
Jumping closer to the present, the report focuses on the Rome Statute of the International
Criminal Court (ICC) and Canada's Crimes
Against Humanity and War Crimes Act. (CAHWCA), which has more
bite. ICC only covers crimes committed after its July 2002 establishment, whereas CAHWCA is
retroactive. Furthermore, ICC exposes corporate officers, directors, and employees to criminal
prosecution as individuals, whereas under CAHWCA, corporations are liable.
also addresses the Alien Tort Claims Act (ATCA), a 1789 law against piracy resurrected in 1980 to confront international human
rights abuses that applies to Canadian corporations doing business in the US--for example in the Presbyterian Church of
Sudan v. Talisman Energy case that prompted the company to adopt a human rights policy.
The report examines the implications of the International Criminal Tribunals for Rwanda
(ICTR) and the former Yugoslavia (ICTY), which do not have jurisdiction over
corporations as legal persons but are nevertheless setting definitional precedents on how human
rights cases are tried.
"Tribunal rulings are shaping legal definitions of complicity and
have helped to erode the concepts of diplomatic immunity and national sovereignty as protections
against prosecution for human rights violations," states Mr. Walker.
Most corporate human
rights violations involve not direct involvement but rather complicity, which the report defines as
"practical assistance, encouragement, or moral support that has a significant effect on the
perpetration of the crime, and the knowledge that these acts aid and abet the perpetrator."
The report makes several recommendations (in addition to implementing human rights policies)
for companies to avoid entanglements in complicity. Recommendations include adopting the Voluntary Principles on
Security and Human Rights in the US and UK, disclosing royalty and tax payments to host country
governments as well as encouraging governments to do the same by participating in the Extractive
Industry Transparency Initiative (EITI).