In a country with major energy and water reserves, Canada’s companies have clear opportunities to become leaders in sustainable growth
In a country with major energy and water reserves, Canada’s companies have clear opportunities to become leaders in sustainable growthCanada’s big corporate responsibility issues boil down to two fundamental challenges: energy and water. Within Canada’s borders are the world’s second largest single oil reserve after Saudi Arabia and nearly 10% of the world’s fresh water, while the nation’s coastline is the longest in the world. So, whether or not Canadian corporations address the resource issues holistically is of global importance.
Even before the widespread acknowledgement of the human causes of climate change and the onset of a carbon constrained economy, and long before the BP spill in the Gulf of Mexico made oil an even dirtier word, Canada’s oil-sands-based petroleum companies faced a corporate responsibility puzzle. How to ensure a social licence to operate and demonstrate genuine commitment to improvement while removing nearly 1.5m barrels of oil per day from former farmland and caribou habitat.
In 2009 net energy exports accounted for nearly 3% of GDP, and the oil sands are about half of this, and growing, according to the US Energy Information Administration.
Marlo Raynolds, executive director of the Pembina Institute, a Calgary-based thinktank focused on developing sustainable energy solutions, says: “[Although] sustainable fossil fuel development is somewhat of a paradox, oil sands must be developed in a manner that is in keeping with science-based environmental thresholds.”
This should mean only approving projects with effective environmental management systems in place that would address reclaiming wetlands, managing liquid tailings, making sure that aquatic needs are met in river basins, and establishing areas off-limits to industrial development.
Raynolds concludes: “Ultimately best practices in environmental management and execution of projects should be mandatory.”
There are bright spots on the sustainable energy horizon, both within and outside the oil sector. The Oil Sands Leadership Initiative (OSLI) is an industry collaboration with a vision of achieving world-class environmental, social and economic performance in developing the oil sands resource. OSLI facilitates four industry working groups that focus on water management, sustainable communities, land stewardship and technology breakthrough.
Ontario is a leader in renewable energy development and has taken a bold and internationally noticed stride with its Green Energy Act and the introduction of the feed-in tariff programme.
This is North America’s first comprehensive guaranteed pricing structure for renewable electricity production. It is early days yet but several provinces are poised to follow suit, clearing the way for energy companies to invest in renewables, and non-energy companies to shift their power supply to more sustainable sources.
Water water everywhere
Nearly 9% of Canada is covered with fresh water, and conservation, restoration and effective management of water resources is an area in which corporate Canada is increasing its activity and, in a few cases, leadership. This includes efforts from pulp and paper companies, such as Quebec-based Cascades’ closed loop production (see box), to marine stewardship programmes, such as national grocer Loblaw’s commitment to stocking only sustainable seafood by 2013.
At an inaugural Canadian Water Summit hosted in Toronto early this year, water policy experts and corporate players discussed the need for better management of Canada’s water resources. The overwhelming sentiment at the event was that the water agenda in 2010 is roughly where the climate agenda was 10 years ago, and that it will only be of growing importance.
Hadley Archer, WWF Canada’s vice-president, strategic partnerships, points out that water is not priced in many Canadian regions. “With climate change we are predicting that where it’s dry it’s going to get drier, where it’s wet it’s going to get wetter,” he says. “Business needs to understand how to manage this reality.”
As with the energy and climate conversation, government policy can have a significant impact on business.
Anthony Watanabe is chief executive of the Innovolve Group, a sustainability consultancy and host of the Water Summit. He is enthusiastic about Ontario’s proposed water opportunities and water conservation legislation. “If the province has its way, five years from now delegates at sustainable investment conferences around the world will be talking about Ontario not only for green energy but also for water technology,” Watanabe says.
Meanwhile, Watanabe points out, Manitoba is already ahead on the water agenda as the only province with a ministry of water stewardship. The absence of a federal strategy has led to the current fragmented approach. “Some of this fragmentation is necessary,” he says, “given the regional nature of water issues, but imagine what these leading provinces could accomplish with the support and vision of our federal administration.”
Where government is failing to imagine the opportunities, foreign business is stepping in. Oakville-based Zenon Environmental is a global leader in water purification and wastewater treatment, a corporate responsibility and business opportunity that is developing quickly with rapid industrial expansion stressing already fragile water systems around the world. The company was recently acquired by General Electric. Ecomagination, indeed.
Water issues
And, like the climate conversation, water has its complexities that need to be understood by industry. For example, agriculture is often cited as a high consumer of water – during the water summit agribusiness was referred to as “the elephant in the room”. Yet Denis Tremorin, manager of sustainable production at agricultural industry group Pulse Canada, which represents growers and processors of pulses (beans, chickpeas, peas and lentils), points out that “of the 7.4m acres of pulses grown in Canada in 2010, 99.3 % of this land will not be irrigated. Approximately 2m of Canada’s 167m acres of farmland is irrigated.”
Similarly, the forest products industry – the largest net exporting industry in the country – exemplifies the need to distinguish between water “use” and “consumption”. “Used” water, the main concern of forestry, flows through production systems and returns to the water table. Here, issues of water quality and habitat disruption are paramount. “Consumed” water, on the other hand, is removed by way of absorption into growing crops or otherwise, so volume reduction is a concern.
It is early days yet, but companies are finally putting “assess water impacts” on to-do lists. Forestry companies such as Cascades and Weyerhauser have been measuring direct water impacts for several years. Now, a diverse range of large companies, including Royal Bank of Canada and Wal-Mart Canada, are starting to assess their water-footprints.
Canada’s companies are, inevitably, affected by changing strategies at the major US corporates. One encouraging impact of the likes of Wal-Mart focusing more on sustainability is the dramatic increase in life-cycle thinking that a range of Canadian companies – from consumer products companies to energy producers – are choosing to adopt.
There is a cluster of life-cycle activity centred in Quebec. Ciraig – the Interuniversity Research Centre for the Life Cycle of Products, Processes and Services – pools the strengths of Canadian universities in the fields of life-cycle assessment and life-cycle management.
It works with academics in Canada and Europe, offering leading edge research that is being funded and eagerly applied by some of the country’s largest sustainability players, including Hydro Quebec, Rona and Cascades.
Much ink has been spilled in Canada, as elsewhere, over how to “embed” corporate responsibility so that it is not limited to one department or, worse, one-third of one person’s job description. A strategy Canadian companies have been employing to achieve this is a greater focus on board-level governance.
Directors onboard
Robyn Hall is manager of communications at Canadian Business for Social Responsibility, a networking not-for-profit group aiming to improve social and environmental performance in Canadian business. She says: “Boards of directors are increasingly recognising that effective management of social and environmental risks can improve business performance.”
CBSR’s recently released CSR governance guidelines highlight best practice and case studies from companies such as Cameco, Gildan Activewear, Loblaw and Potash. They demonstrating that companies that embrace corporate responsibility at a board level are better able to carry out strategic vision, have enhanced accountability, improved risk management and more effective communications.
In contrast to the sector globally, banking is a sector that has performed strongly. The five large Canadian banks typically rank among the top performers in overall governance among publicly listed companies in Canada. This has been cited as the reason the Canadian banks, and by extension, the Canadian financial system, have weathered the recent economic hardships so well.
The differences in approach for the financial services sector in Canada are complex but they essentially boil down to enhanced disclosure practices as opposed to the strictly rules-based approach of the US system. This has supported the evolution of another key strength: the way in which money is leant. Particularly for mortgages, banks are de-incentivised to lend to high-risk borrowers, which in turn leads to greater stability with potentially reduced short-term profits but generally increased gain over the long term.
There are many aspects to the differences in the Canadian banking system, but the bottom line is it’s working, to the degree that the World Economic Forum’s 2009-10 Global Competitiveness Report ranked the Canadian banking system as the world’s soundest for the second year in a row.
And so there are bright spots and signs of leadership and innovation. But the global energy and water issues, and Canada’s role therein, present a need for much more than just highlights. Current circumstances necessitate strengthening and reinforcement of efforts in order for business to thrive in a healthy society and environment in the coming decades.
Gildan Activewear – addressing energy, water and life-cycle thinking
Ten years ago, Montreal-based Gildan Activewear was still manufacturing most of its blank T-shirts in the Montreal area. But the company experienced the same market pressures that pushed other local clothing companies – such as Jacob, Le Chateau and La Senza – to move at least some production to developing countries.
The key difference is that Gildan is vertically integrated – it owns and manages its own spinning, knitting, and cut-and-sew factories. Where its peers’ factory labour issues were met with the feeble “we don’t own any factories” defence, for Gildan it was a different situation.
Since first being investigated by Maquila Solidarity Network (MSN) in response to alleged labour violations, such as firing workers for forming a union, and making a very unfavourable appearance in a Canadian Broadcasting Corporation programme – Sewing Discontent – in 2001, Gildan has transformed into a leading player in corporate responsibility.
Gildan’s strategy now reaches far beyond best-in-class labour compliance policies to include a life-cycle approach to their products. This includes energy and water management systems, enhanced governance practice, with board-level oversight of corporate responsibility, and ongoing measurement and reporting using the Global Reporting Initiative framework.
Downward pressure on T-shirt prices over the past decade have not relented and Gildan is in no way exempt from the challenges this entails. It has nonetheless managed to engage with relevant NGOs (including MSN) to implement these improved labour practices, and to communicate more transparently.
The company has gleaned kudos from a few quarters, including ranking in the top ten of the Globe & Mail newspaper’s Board Games award for good governance for three consecutive years. Gildan was also listed in the Top 50 Corporate Citizens by Jantzi Research in 2009. And, at the same time, the company was posting consistently strong financial results in the stock market.
With over US$1bn in sales of T-shirts and socks in 2009, Gildan is a significant player in the international clothing industry. Their comprehensive and strategic approach to corporate responsibility appears to be worth the effort.
Cascades demonstrates leadership in water responsibility
Cascades is a Quebec-based forest products company that makes household paper products, fine papers, packaging, furniture and construction materials. The company was founded 45 years ago essentially as a recycler of waste material, and this approach has continued to drive its sustainability programme.
As the water agenda grows in Canada, leading companies, including Cascades, are benefiting from a transparent and proactive approach. The company uses only a sixth of the water used by its industry peers, through a series of highly innovative production practices, including “closed loop manufacturing” at some of its facilities.
Cascades measures and reports against three water-related key performance indicators relevant to its sector – water consumption, suspended solids returned to effluent, and biochemical oxygen demand after five days in effluent. It has recorded year-on-year improvements in all categories since 2007.