Mandatory Environmental Corporate Social Responsibility: Can Canada become a leader?

CSR-title-graphic

Corporate Knights, 2011 [3]

Environmental Impact Assessment (EIA) has become an integral part of the corporate decision-making process. This acceptance of EIA as a project decision making tool with processes for identifying and evaluating impacts has translated into the world of corporate management with the creation of various public reports on corporate social responsibility (CSR). Over the past decade sustainable development reporting has been adopted by the majority of Canadian companies as a means of strengthening the link between the companies and their stakeholders [2]. Unfortunately, the comparison of those reports is hampered by the difficulty of defining corporate social responsibility [3]. As Cory Searcy states in his article [1] corporations have been struggling with the question of what information they should be sharing with the public and how should they be presenting it.

The issues of defining CSR and reporting how a company’s environmental, social and governance programs meet their corporate sustainable development goals can be addressed through the use of reporting standards. But what reporting standards should be used? There are a multitude of guidelines and standards for CSR reporting that have resulted in a very broad range in the quantity and quality of information in CSR reports [1]. The experience of the last ten years shows that voluntary reporting may not be serving stakeholders and the public very well. Analysis of 94 Canadian corporate sustainability reports showed that 585 different indicators were reported yet only three indicators were shared between the companies [1]. This degree of variance in the reports is surprising given the robust standard of the Global Reporting Initiative (GRI). Voluntary reporting may be widely accepted, but it clearly is not serving the needs of the stakeholders and the public.

GRI Reporting Cycle

GRI Reporting Cycle [4]

Mandatory reporting addresses most of the shortcoming of voluntary reporting. It allows for clearer corporate communication with mutually understood terminology and measures, and allows stakeholders to more easily compare the CSR statements of various companies [2]. In 1993 Canada was one of the leaders in mandatory reporting with the Whitehorse Mining Initiative, but has lagged since then. Corporate lobbying and government reluctance to regulate has left Canada with a poor voluntary reporting process and few standards. In countries where mandatory reporting structures have been adopted, socially responsible managerial practices have increased, and sustainable development key performance indicators have been implemented [2]. With a mandatory reporting structure in place, overall social responsibility increases due to improvements in communication and comparability.

How can Canada regain a leading position in CSR reporting? Adopting mandatory reporting standards based on the GRI guidelines for all companies would be a good start. The current reporting structure involving the financial and other regulated industries needs be expanded to incorporate the GRI standards. On the world stage, this would allow Canadian companies to better demonstrate their commitment to corporate sustainable development and would help Canada to repair its environmental reputation.

 

References:

[1] Searcy, Cory (2012) Mandatory reporting? Corporate Knights, 11(1), 38-39.

[2] CGA-Canada (2011) Regulating sustainability reporting – Is a mandatory approach better than a voluntary one? December 2011.

[3] Drohan, Madelaine (2011) Big country, small steps: Taking a critical look at the last decade of corporate social responsibility in Canada. Corporate Knights, issue 35, 25-28.

[4] Brown, H. S., de Jong, M., & Levy, D. L. (2009). Building institutions based on information disclosure: lessons from GRI’s sustainability reporting. Journal of Cleaner Production, 17(6), 571-580.

Advertisements

Should the Insurance Industry Take a More Active Role in EIA?

According to a recent article in the Globe and Mail’s Report on Business the only industry that has firmly embraced the reality of climate change is the reinsurance and insurance industry.  Extreme weather events are happening more frequently due to climate change, and surprisingly the insurance industry is convinced that the change is being caused by human activity [3].  Reinsurers and insurers rely on being able to judge that the risks to the projects that they insure can be accurately modelled over the entire lifespan of the project: their financial well-being depends on it.  With the increased occurrence of extreme weather events over the past 40 years, losses incurred have climbed steadily with the weather-related claims paid out doubling every decade since the 1980s [3].  These ever increasing payouts have motivated the world’s biggest reinsurers and insurers to accept climate change as a reality and become experts at modelling the expected changes over the coming decades.  They have incorporated the results of those models into their calculations about the risks associated with the projects that they insure.Rescue-workers-walk-past-homes-destroyed-by-Superstorm-Sandy-Oct.-31-2012-in-Seaside-Heights-New-Jersey.-Mario-TamaGetty-Images-650x433

(Mario Tama, Getty Images 2012)

The Environmental Impact Assessment process is supposed to identify and predict the impacts of a proposed development over its entire lifespan – from planning through construction and operation to decommissioning [2].  Further, the EIA process is to propose mitigation measures for those impacts along with a plan to monitor them over the project lifespan and beyond.  These mitigation measures along with decommissioning and rehabilitation after the completion of the project involve the highest level of uncertainty in the EIA process [2].  For the insurance industry these activities present the biggest financial risk, especially decommissioning and rehabilitation.  The risk increases with time as the extent of the impacts of the project increase leading to the possibility that more people may be affected over a greater area leading to greater compensation costs for the insurer.  Of special concern are decommissioning costs as there is a higher probability that the project proponent may not fulfill their obligations for site rehabilitation leading to those costs being passed on to the insurer [4].  Environmental insurance policies up until now have generally been for specific impacts of a project such as the damage caused by the release of dangerous materials into the air or water, or onto the land.  The world’s largest insurers, such as Munich Re and Lloyd’s, have come to the conclusion that they must incorporate climatic change into their calculations of the risks involved when insuring various large long-term projects [3].  The Insurance industry is concerned with the accuracy of the projected long term effects, cost of mitigation, cost of decommissioning, cost of damages that may be incurred, but uncertainty in the environmental assessment process makes this difficult.  While it is understood that there are uncertainties in the prediction of the future, the communication of those uncertainties to decision makers needs to be improved [1].  Research by the insurance industry has quantified some of those uncertainties [3] and it needs to be shared with the EA community.

Since the insurance industry is able to quantify some of the uncertainties of the EA process, should they take a more active role in EIA?  If so, at what level should they participate?  Should they function within the regulatory process, or as independent evaluators?  Within the regulatory EA system, proponents could benefit from insurance industry expertise when preparing project submissions and regulatory agencies could benefit from better analysis of the risks of the projects they are evaluating.  Perhaps insurance industry evaluation of a project should be a required component of the regulatory process.  I believe including insurers in the EA process would improve the quality of EA.  The EA process would benefit from the ability of the insurance industry to provide insight into the uncertainties in the EA process, especially with respect to impact prediction and mitigation.  Furthermore, the impacts of climate change would be included in all projects regardless of the acceptance of the magnitude of those changes by both proponents and regulators.  It is time for the insurance industry to work with all parties in the EA process to improve that process and help provide a better future.

CBC_Toronto2013

(CBC, 2013)

References:

[1] Gunn, J. & Noble, B. (2014). Uncertainty disclosure and consideration in environmental assessment: An agenda for research and practice. Unpublished, presented on Jan. 7, 2014 at Concordia University.

[2] Noble, Bram. (2008). Introduction to Environmental Impact Assessment: A Guide to Principles and Practice, Second Edition. Toronto: Oxford University Press

[3] Reguly, E. (2013, 12). The smartest guys on the planet. Report on Business, 30(5), 66-76.

[4] Susavidge, M. A. (2002, 03 01). Environmental insurance insuring the deal. Retrieved from http://www.canadianunderwriter.ca/news/environmental-insurance-insuring-the-deal/1000113570/?&er=NA

Should economic development trump environmental assessment – the example of the Port-Daniel-Gascons Cement Plant

On September 3rd 2013 the Premier of Quebec, Pauline Marois, announced that the Port-Daniel-Gascons cement plant would not have to be submitted to an environmental review by the Bureau d’audiences publiques sur l’environnement (BAPE), allowing construction of the near billion dollar project to begin by the end of the year (Haroun, 2013).  The PQ government and the proponent of the plant, McInnis Cement, state that the project will meet all environmental regulations and “be a model of environmental performance” (McInnis Cement, 2013).  More importantly its construction and operation will create 400 to 600 direct and indirect jobs over the next 2 years in a chronically depressed area of the province.  Local ecologists are dismayed at the decision to exclude this project from the BAPE as it will be responsible for more than 2 million tons of Green House Gas emissions per year once in operation (Haroun, 2013), increasing Quebec’s GHG emissions from industry by 10% alone.

Yet again the role of the environmental assessment process has been misunderstood by Quebec politicians and the business community for short-lived regional economic development and short-term political gain.  While it is true that this project was submitted to the government for approval before June 22, 1995, when the environmental rules governing such developments were strengthened (Haroun, 2013), the magnitude of the impacts of this project should have played a more important role in the decision making process.

Environmental assessment is a crucial part of the decision making process for the carrying out of a project.  It is a process that is supposed to identify and predict the impacts of a project, find ways to minimize or avoid negative impacts, enhance and create positive impacts, and ensure that the environmental consequences of development decisions are fully understood (Noble, 2008).  It is a tool for a sustainable future, not a hindrance to development.  In Quebec, for over 30 years the BAPE has been tasked with conducting public reviews of projects that have significant impact on the environment (BAPE, 2009).  The BAPE procedures for public consultation are regarded as some of the best in the world – both impartial, and fair to all parties involved.

One may ask why the Port-Daniel-Gascons cement plant should be reviewed by the BAPE, as it appears to have met all legal requirements for its approval and construction.  First, it will be the largest cement plant in Quebec and one of the largest in the world.  Second, it will use fuels that will lead to a significant increase in CO2 emissions for the whole province – contrary to Quebec’s policy on GHG emission reduction (Ministère du Développement durable, de l’Environnement, de la Faune et des Parcs, 2013), and in the future they may use alternate fuels, such as tires, that will have more environmental impacts.  While the project proponent states that it meets all requirements for emissions they omit the fact that those limits are voluntary (CCME, 1998).

592414-site-cimenterie-port-daniel-investissement

La Presse, 2012

Cement kilns, the heart of any cement plant, need a large supply of high energy content fuel to maintain the very high temperatures required for the conversion of limestone into the intermediate product that becomes the primary component of Portland cement (Chen et al, 2010; Van Oss & Padovani, 2002).  Every ton of cement produced needs approximately 1.25  tons of limestone, 1/3 ton of clay, 200 litres of water, and 450 kg of petroleum coke (the proposed fuel) (Chen et al, 2010).   The process produces significant emissions of particulates (dust and smoke) and gases with CO2 having the largest impact (Van Oss & Padovani, 2002).  In the case of the Port-Daniel-Gascons plant, the source fuel that McInnis has chosen, petroleum coke has a significant environmental impact of its own.  Petroleum Coke, or Petcoke, is a by-product of the refining process of petroleum (IUPAC, 1997).  It is high in carbon content making it a suitable fuel for the high temperatures (1450 to 1500 degrees Celsius) needed inside a cement kiln.  Alternative fuels for cement plants include: coal, oil, natural gas, and various waste products such as tires.  The same high temperatures allow for the destruction of hazardous waste – both biological (medical and animal processing), and chemical (Van Oss & Padovani, 2002).

The impacts of the GHG emissions alone should have warranted a review of the project, the economic and social impacts should not be overlooked.  The Port-Daniel-Gascons cement plant proposal is not new – it was first proposed in 1990, and had an abortive start to construction in the late 1990’s.  Despite the best efforts of successive provincial governments the project has not been started as the economic situation in the United States has been the main driver of the project (McInnis Cements, 2013).  Such a large cement plant cannot function economically within the Quebec economy – exporting to the world market is the only option for a viable operation.  With the current global financial and trade situation reliance on exports is a path fraught with uncertainties that offers no guarantees for the long term operation of the plant.  Might it become another Gaspésia fiasco?  For the sake of the Gaspe region one hopes not, but it is one aspect that a full BAPE review would put to rest.  Who will take responsibility for the environmental, economic, and social impacts after the political gains have long since disappeared?  Let’s hope the government sees the error of its ways and sends this project to a full review to the BAPE so that it can build a solid environmental legacy when other levels of government are failing to do that.

 

References:

Bureau d’audiences publiques sur l’environnement (BAPE). (2009). Plan stratégique 2008-2013, Québec, Bureau d’audiences publiques sur l’environnement.  Retrieved from: http://www.bape.gouv.qc.ca/sections/documentation/plan_strat_2008-2013.pdf

CCME (Canadian Council of Ministers of the Environment)(1998). National Emission Guideline for Cement Kilns. PN 1284. Winnipeg, Manitoba :CCME

Chen, C., Habert, G., Bouzidi, Y., & Jullien, A. (2010). Environmental impact of cement production: detail of the different processes and cement plant variability evaluation. Journal of Cleaner Production, 18(5), 478-485.

Haroun, T. (2013, September 3).  Port-Daniel-Gascons – Un projet de cimenterie d’un milliard échappe au BAPE. Ledevoir.com. Retrieved from : http://www.ledevoir.com/environnement/actualites-sur-l-environnement/386525/un-projet-de-cimenterie-d-un-milliard-echappe-au-bape

IUPAC ( 1997). Compendium of Chemical Terminology, 2nd ed. (the “Gold Book”). Compiled by A. D. McNaught and A. Wilkinson. Blackwell Scientific Publications, Oxford.

McInnis Ciment (2013). Retrieved from http://cimentmcinnis.com/projet-cimenterie-ciment-mcinnis

Ministère du Développement durable, de l’Environnement, de la Faune et des Parcs (2013), Inventaire québécois des émissions de gaz à effet de serre en 2010 et leur évolution depuis 1990, Québec, ministère du Développement durable, de l’Environnement, de la Faune et des Parcs, Direction des politiques de la qualité de l’atmosphère, 20 p.

Noble, Bram. (2008). Introduction to Environmental Impact Assessment: A Guide to Principles and Practice, Second Edition. Toronto: Oxford University Press

Van Oss, H., & Padovani, A. C. (2002). Cement manufacture and the environment. Journal of Industrial Ecology, 6(1), 89-106.