The New World of Stakeholder Engagement

Even three years ago, a Starbucks customer wouldn’t have had to ask for a straw. Now? Sure. And it’s not just consumer-oriented businesses that have had to roll with the times and become more environmentally conscious; institutional investors and ind
Even three years ago, a Starbucks customer wouldn’t have had to ask for a straw. Now? Sure. And it’s not just consumer-oriented businesses that have had to roll with the times and become more environmentally conscious; institutional investors and industry — including in the resource sector — are also having to get on board.
“Corporate social responsibility is seen as an important business principle in project development,” says Thomas Isaac, a partner in Cassels Brock & Blackwell LLP in Vancouver, whose practice focuses on Aboriginal law as well as energy, and who typically acts for companies.
If one turns the clock back even five years ago, Isaac says, there wasn’t the same degree of sensitivity to the impact of human behaviour on climate change, the environmental impact of mining or other resource-sector projects or to relationships with Indigenous peoples. Now these concerns are at the fore for companies and investors.
“The world is changing very quickly.”
What’s more, investors themselves are now being looked at as fiduciaries, says Kellie Johnston, a senior member of Norton Rose Fulbright LLP’s global risk advisory practice, from her Calgary office. She notes the UN initiative to ensure that institutional investors have fiduciary duties.
 “Investors are not only getting more and more interested in this, but there are looming regulations,” she says. In the European Union, new sustainability-related disclosure regulations will come into force in March 2021. “So, investors are now much more interested,” she says. Notably, in January, BlackRock, Inc., a major American global investment management corporation, pledged to change its investment approach after increased public scrutiny on its fossil fuel and private-prison holdings; BlackRock’s CEO, Larry Fink, even penned an open letter to other CEOs emphasizing the importance of sustainable investing, noting that “in the near future— and sooner than most anticipate — there will be a significant reallocation of capital” by BlackRock.
The statement and letter highlighted the challenge facing investment firms that want the best returns while also being perceived as good corporate citizens.
“When you have BlackRock coming out to say that ‘we’re looking at our portfolios,’ and these are the kinds of things we’re looking at, and companies need to adhere to the Sustainability Accounting Standards Board [a non-profit organization that sets financial reporting standards] for financial material disclosure, it’s a big issue for companies,” Johnston says.
“If you’re looking for money, which mining companies often are, they need to have these sorts of things in place,” she adds. “Not only are investors looking at it from their own ‘right thing to do’ and the changing tone of global investment in the financial industry, but also in Europe and in U.K. there is legislation being passed that actually holds these institutional investors to account for the portfolios and for the companies they invest in.” So, it’s a “two-fold” responsibility for investors and corporations both, she says.
At its heart, though, “mining is, by its nature, hazardous to the environment,” Johnston adds. “That’s where mining is so deeply entwined” with the environment and communities, and “that’s why ESG [Environmental, Social, and Governance] issues are really significant for mining companies; you release toxic elements into the air, which impacts the water and soil, and you have toxic fluids you’re using. If … something bad happens, there’s the potential for a major impact on the community. So, the environmental risk … is quite big.”

The new regulatory environment

For environmental trends related to mining and the regularity world, “the word ‘change’ comes to my mind right away,” says Janice Walton, counsel at Blake Cassels & Graydon LLP in Vancouver.
“I have seen a significant amount of changes to environmental law over the past few years,” says Walton. The mining industry is often dealing with projects that take “a very, very long time to go from early exploration stage to up-and-running; a very long time,” she says. When changes to the mining laws and environmental assessment laws, and to the principle regulatory statutes such as the Fisheries Act, are made partway though the process, “it creates a level of uncertainty that can be difficult.”
This is less a concern for short-term projects, but for big mines that take a long time to develop, “having some stability in terms of what your rules are is helpful, and that’s not our situation in Canada,” or, in fact, in most of the Western world that has been developing environmental laws over the past 30 years, which change as more of the science is learned, and affects industries such as mining and oil and gas in particular.
In Canada, for example, an environmental assessment is needed for a mine being built. The environmental assessments regime that had been established in Canada was replaced last year with the Impact Assessment Act. Similarly, says Walton, the Fisheries Act has been changed several times. In British Columbia, she is seeing increasing implementation of the Species at Risk Act.
“We’re seeing more and more … complications occurring, where the federal government wants to take a certain action, but most of the concerned legislation is provincial. It’s a balancing act. In B.C., efforts are also underway to protect mountain caribou, and a conservation agreement is still in draft form.
“This will certainly have an impact on resource companies in the areas of mining and other resource sectors. That kind of thing can be very challenging; it creates uncertainty, which reverberates in [the] market.” Sometimes, the best advice to clients is to maintain good working relationships with the regulators, she says.
And Canada is expected to soon join other Western nations in tabling, and even passing, legislation on modern-day slavery in supply chains.
“We expect to have a modern slavery act passed this year,” says Johnston, whose firm has been at the table in these discussions, she adds.
Last April, the All-Party Parliamentary Group to End Modern Slavery and Human Trafficking announced the completion of the draft Transparency In Supply Chains Act (TSCA). The parliamentary group was launched in April 2018.
Elsewhere, California, the United Kingdom, Australia and European countries such as France, the Netherlands and Norway have already passed legislation requiring companies to confirm that they have found not forced labour, child labour or human trafficking in their vendor supply chains. Companies in these jurisdictions must also publish their findings on their corporate websites, says Johnston.
The issue has gained momentum as investors and other stakeholders are putting pressure on corporations to achieve ESG goals. Recent shareholder proposals seeking greater reporting on supply chains have been put forward at annual meetings of two Canadian public companies, and in the U.S. activist shareholders have tried to push through similar changes.
Although the two Canadian public companies were a retailer and a dairy manufacturer, the mining industry has also been paying attention to their supply chains. This is, in part, because of class action lawsuits such as that against Vancouver-based Nevsun Resources, charged in 2014 by three Eritreans of using forced labour at its Bisha mine in Eritrea. (The Supreme Court of Canada heard arguments in the case in January 2019.)
“That is an issue from the supply chain perspective,” says Johnston. “And, certainly, from an ESG or sustainability perspective, mining companies are going to need to and want to get ahead of that, and make sure that they go through their supply chain and ensure that they don’t have any of those kinds of risks there.”

Indigenous community consultation in Canada and abroad
Shin Imai has made a study of problems that arise with major international mining projects interacting with Indigenous communities. “It’s a very disruptive industry,” notes the professor and director of the Justice and Corporate Accountability Project at Osgoode Hall Law School in Toronto.
“They have to keep finding new places to mine because old mines are mined out. You usually find Indigenous people there. It’s a systemic issue: disruption for Indigenous peoples. As we go along, how that interface between mining companies and Indigenous peoples is handled is very important.”
In Canada, the courts have interpreted the Constitution as dictating consultation with Indigenous communities, Imai says. But that’s not the case elsewhere in the world. “In Brazil, the government is letting the Amazon burn, partly because they want to open it up to mining and agriculture,” he says. The jungles are home to some Indigenous groups who have not ever been contacted by outside societies.
“There, there’s been a huge slide backward. The Indigenous right to land had been recognized, then a new president came in” and said that recognition was getting in the way of development and mining. This may be good for Canadian mining from a business perspective, but it may be damaging socially and environmentally.
The answer to how the inevitable conflict is handed lies in the role that Indigenous peoples play when there’s conflict, he says; if it’s dealt with violently, through a legal framework, or requiring consent from Indigenous communities.
Imai points to one conflict that attracted international attention, when Tahoe Resources, a Vancouver-based mining company, claimed its personnel was acting in self-defence after being attacked by protesting farmers outside its Escobal mine in Guatemala in 2013, and security guards opened fire on the unarmed protesters.
A lawsuit was launched in Canada, and the company had to pay compensation. (Today, the Escobal mine is owned by Pan American Silver.) There were also at least five targeted assassinations of opponents of the mine, says Imai. “How do you deal with that situation, when the government of Guatemala ... is corrupt, and there’s no independent investigation?”
Although he notes that all the mining companies now have something on corporate and social responsibility on their websites, he’s not sure that’s made a difference on the ground.
“All the mining industry can show is there’s been more talk. All I can see are specific disputes. If there is a way of dealing with specific disputes, maybe the larger picture can come into focus.”
In January 2018, it was proposed that an office be created in Canada for an ombudsperson who could investigate situations such as occurred for Tahoe Resources, and demand records from the mining companies, says Imai.
There is an agency — the Office of the Extractive Sector Corporate Social Responsibility Counsellor — within Global Affairs Canada that does perform some investigations. But Roy Millen of Blake Cassels & Graydon LLP in Vancouver is concerned an ombudsperson may be insufficient to deal with the serious concerns around Indigenous rights, which need to be taken up at the highest level, he says, namely the courts. “An ombudsperson’s office is, to me, better for dealing with smaller complaints that don’t involve a higher justice level.”
Isaac says he has seen a growth in sensitivity by mining companies in the past few years. “It’s clear that the companies are becoming increasingly aligned” with corporate social responsibility, and that “community-driven responsibility has become a key component for doing business” in Central and South America, he says.
“What we’re seeing is companies doing their due diligence prior to engaging in serious project development and coming to their projects with an idea of what the company deems to be important from a CSR perspective.”
The “outliers” are more on the government side, Isaac believes. “Corporations respond to the regulatory environment in which they work,” but in provinces such as Saskatchewan and Manitoba, he says, “we see a dragging of the feet … on putting into place a full duty-to-consult regime that meets the legal requirements.
“From an Aboriginal law perspective, if you’re working in a jurisdiction that’s struggling with the Crown’s duty to consult, how then does the company go about … more aggressive business policy approaches around CSR, when you have a regulator that’s not pushing?”
When he first began to work in the area of Aboriginal law, the Supreme Court’s decision in Haida Nation v. British Columbia (Minister of Forests) had just come out, in 2004, which had “a transformative effect,” says Maxime Faille, a partner at Gowling WLG in Vancouver. Haida remains the leading decision of the Supreme Court of Canada on the Crown duty to consult Aboriginal groups prior to exploiting lands to which they may have claims.
Clearly, says Faille, “there has been a progression” since then. Although there was a degree of reticence initially in engaging in community consultations, he says, “now it’s just part of business, of being a good corporate citizen. How do we work through it, so that projects that are worthwhile do get done, and make sense for the proponent, the public and Indigenous communities and their impact on them?”
And the question of who has the authority to agree to resource-intensive projects such as new mines has also been tested recently, as some hereditary chiefs of the Wet’suwet’en First Nation and their supporters have blocked the construction of Coastal GasLink’s natural-gas pipeline through their traditional territory despite the company having received the consent of all the band councils along the route.
“There are always lots of moving parts, and that’s one of them,” says Faille, conceding that “that’s not an easy piece.” Even where there is a strong willingness and desire on the part of companies to work with Indigenous communities, identifying with whom those partnerships need to be built can be a challenge, he says, and territories themselves may be subject to more than one Indigenous group.
While sometimes the lines of authority are clear-cut, at other times they are not, and Indigenous communities themselves may have disagreements regarding whose traditional territories are being affected and who is properly the rights holder and decision-maker. This was in evidence with the Wet’suwet’en protest this winter, when hereditary chiefs disagreed with the band councils’ approval of the Coastal GasLink pipeline project and with each other.
“Project proponents are not in the best position to make assessments,” says Faille, who doesn’t believe there’s a clear legal answer to who has authority that applies across the board, either.
The Indian Act was enacted and imposed on Indigenous communities across Canada in 1876, supplanting traditional Indigenous forms of governance. “In many cases, it has been reconciled with Indian Act band status, but in other cases not,” says Faille. In most cases, communities have reconciled their traditional forms of government with the Indian Act band status, he says, but in other cases not.
“It may be a different group that represents the collective when it comes to the exercise of Indigenous rights as opposed to the exercise of governance authority over reserve lands. In some cases, the rightsholder is the treaty group as whole, and not at the local [band] level. In some cases, it can be at a broader nation level. [It] defies a cookie-cutter answer, and that certainly does present a challenge.”
Yet, even if an Indigenous group says no to a project, the Crown may still approve it, Isaac points out. “If the consultation was adequate, the Crown can approve it; that is the law.” The Crown can infringe Aboriginal title if it is justifiable, he says.
Indigenous communities have also partnered with resource companies on projects, working on mine sites and potential mine sites, and providing goods and services to mining companies. Partnerships may exist with the mine owner, or any party performing work on the project, and successful partnerships generally include labour training.
There is an increasing amount of work that can be and is done on mining projects by Indigenous partners, says Millen: on the environmental consulting side, and by service companies owned by First Nations members: electrical contractors, road contractors, civil work and camp operations.
“All of those are areas in which I’ve seen economic participation” in the mining industry, Millen says. “Now it’s common,” unlike in years past.
Faille agrees that Indigenous groups see the opportunity and potential for benefits and economic development for its members. “Indigenous communities are respectful of projects done in a respectful way,” he says. “In my experience, … if you’re willing to allow a community to say no, you’re more likely to [get a] yes.”
The adoption of the UN Declaration on the Rights of Indigenous Peoples in 2007 and the passage of the B.C. Declaration on the Rights of Indigenous Peoples Act in November show that “in Canada, what we’re seeing is being replicated internationally,” says Faille — or vice versa.
And engagement is more personal. “I frequently talk with CEOs on how to achieve good relations with First Nations, and they want those good relations, and are putting a personal touch into that,” says Millen. “If the perception is that this [relationship] is outsourced or hived off, that is infrequently the case now, and it’s hard to be successful if you do take that approach.”

Corporate citizens, stakeholders, investors
So, how important is it today for mining companies to be considered
good corporate citizens?
“It’s critical,” says Walton. “They have to be good citizens, they have to function in our communities, and be good citizens with respect to all their social issues. I don’t think mining companies in Canada can get off the ground if they’re not.”
The Canada Business Corporations Act was updated last year, and it includes a broader vision of stakeholders, says Johnston. These include Indigenous communities, a company’s own employees and the communities in which it operates.
And reputation is important. Conflicts with Indigenous communities, for example, can get on social media quickly, she says, and have a “huge impact on brand and reputation. … That’s a risk for companies.”
That said, though, the current climate provides “a real opportunity for all companies, especially mining, to be proactive, and to take advantage of the heighted attention to ESG,” says Johnston. “There are opportunities to be innovative and create energy efficiencies; the less you spend, the more you make.”
There’s an opportunity, she says, to make a positive impact on the environment, and a social licence to operate, communicate and work with governments.
“There’s a real opportunity to make a significant impact that’s positive on society and the environment, in my view.”