The Social-Environmental Contract

Question: When does the bottom line trump the environment, or vice versa – and is this an ethical issue?

By Fil Fraser

The Case: You are the CEO of a successful company that works in the oilpatch. You’ve been at it for a while and you play by the rules. You have a contract for work that has environmental implications. The rules, which you know well, allow you to go through with the project, and you have all the necessary approvals. But people who live in the area, including an aboriginal community, mount a campaign against the project and against your company. The project might affect local habitat that could have an impact on wildlife and, according to the protestors, could also have a negative impact on the quality of life of people who live nearby.

You can, with the law on your side, forge ahead and do the work. Or you can alter the work plan to take into account some of the concerns expressed; even though the contract will still be profitable, the extra effort will definitely affect your bottom line. What do you do?

The Panel: Ken Chapman: lawyer, blogger and principal in Cambridge Strategies Inc., a public policy consulting firm | Janet Keeping: lawyer and president of the Sheldon Chumir Foundation for Ethics in Leadership | Eric P. Newell: chancellor of the University of Alberta and former CEO of Syncrude Canada

Janet Keeping: The situation this company finds itself in is a momentous one. The company must choose between exhibiting serious corporate social responsibility (CSR) and merely following the law. Mere adherence to the law is not evidence of CSR in Canada.

Ken Chapman: There used to be a concept that environmental protection was a cost to the bottom line. They are no longer mutually exclusive concepts. Most thoughtful
people now see that environmental responsibility is also good for the bottom line. But it takes a change in consciousness, and we are seeing a significant number of companies, especially in the resource areas, making that change in consciousness.

Eric Newell: Regulations are a minimal requirement, and companies should go beyond regulatory requirements. The first thing I would recommend is to sit down with the people and understand their concerns.

Keeping: The right thing to do is neither to plow ahead, ignoring the community’s concerns, nor merely to “give in” to community objections, assuming you don’t fully agree with the predictions of negative impact on local people’s quality of life.
The right thing is to carry out real consultations with local people (both aboriginal and non-aboriginal) to see if common ground can be found.

Chapman: There are those who will drag their feet, and we know who they are. We’re waiting for them to catch up to the 21st century – and they will or they will die. There is a shift in the consciousness of the population. People expect new enlightened corporate behaviours. Consumers will reward positive behaviours and penalize anti-environmental behaviours through market-based purchasing shifts.

Newell: Government permits and regulatory approvals are one thing, but you really earn the licence to operate in the court of public opinion. If you don’t have the support of your local community, you could win the battle but lose the war. Remember the Steven Covey principle, “seek first to understand and then to be understood.”

Keeping: Of course, the extra work will affect the bottom line, but proceeding without it is morally wrong and probably harmful to the interests of the company, including to the bottom line. However often we may be disappointed by companies’ behaviour, in a rule-of-law state such as ours, we are right to assume companies will obey the law. To show a commitment to CSR means going beyond the minimum required by the law and doing more than lawmakers require. This company can show some real CSR if it undertakes meaningful consultations with the local community.

Chapman: The bottom-line corporate focus on the next quarterly results has been with us for a long time. That is still there with a lot of public companies whose CEOs often live or die on those short-sighted results. It has been one of the major hindrances to long-term thinking about corporate stewardship and sustainability. There’s going to have to be a major change in consciousness, in thinking that goes beyond the next quarter. We’re going to have to start to think of our legacy to the next generation. What kind of a province and what kind of a planet are we going to leave our children? That consciousness is just starting to come to the fore. Sustainability and stewardship are concepts that are well-embedded in the thoughts of enlightened leaders, but there are not enough of them yet.

Newell: It’s both an ethical and a social responsibility issue. If you just charge ahead simply because you have approval, that borders on an ethical issue for me. Regulations are only there as minimal standards.

I can give you an example. When Syncrude got into the reclamation issue, the requirement from the government was that we return the land to at least the same state of productive use as it was before we started the mining. What the government meant by that was to put it back into the same scrub forestry. We weren’t convinced that that was in the best interests of our neighbour, the aboriginal community at Fort MacKay, which was raising cattle on the other side of the river. We went to the chief and council and asked if they were interested in our reclaiming some of the land for grazing. At the time they were looking for a place to bring some bison south from Wood Buffalo [National] Park. Today we have a herd of over 300 wood bison on the land and a joint venture with plans to reclaim enough land to accommodate a herd of up to a thousand bison. This would provide the community with an income stream long after we were gone.

Keeping: If you are lucky, at the end of the consultation process, there will have been found a shared vision of how to proceed. But if the consultations are handled with competency and obvious sincerity, then even if there remain differences of opinion, odds are high that the level of resistance to the project will be lower than it would otherwise have been, and this will bring real benefits to the project and the company.

Chapman: Corporate social responsibility is no longer a marketing exercise or a public-relations ploy or a reactive response to pressures from outside sources. It is now going to have to be an embedded and aligned piece of your corporate culture to remain successful. Corporations, even in the non-resource and the non regulated industries, really operate on a social-licence basis. With the open communication and the disclosures that we have, the corporate world is no longer as private or as narrow in purpose as it used to be. You can’t mislead and you can’t obfuscate through clever ad campaigns and key media messaging, because people can see through it and they will call you on it.

This is a cultural change, not just a business-model change. This is a fundamental change in the character of commerce.

FINAL WORD
In today’s environment, corporations can do the right thing because of their commitment to long-term sustainability or out of fear that, in a world where there are no longer any secrets, they will get caught. Either way, environmental concerns have profoundly changed the way that businesses operate. Much of the corporate world is way ahead of governments on these issues. It’s time for governments to raise the bar to match the “social licence” under which companies operate in the
real world.

Current Issue