When social responsibility takes toll
For some time — decades, in fact — corporate governance gurus have been dragging Canadian business into an ideological swamp. Instead of simply pursuing profits for shareholders, it is now taken for granted that bankers, CEOS, directors, C-suite executives and institutional investors must champion corporations as centres of social and political agitprop. Profits may be a corporate objective, but only as part of a laundry list of subsidiary and subversive preoccupations and obligations.
Corporate social responsibility (CSR), sustainable development, environmental and social corporate governance (ESG), impact investing, triple bottom line, social finance — no CEO in any major industry can deliver a speech without confirming his company’s dedication to one or all of the above along with a host of other politically correct objectives.
Corporate websites are filled with CSR jargon that duplicates ENGO calls for political action. “Climate change is one of the most pressing issues of our time,” the Royal Bank of Canada declares in a “position statement” on climate change. The bank says “we” support the principles of the Paris Agreement.
But what if the pursuit of such non-profit objectives and political activity has the unintended consequence — at least on the part of the executives — of destroying the underlying foundations of corporations and the market economy they operate in?
There may be no better demonstration of the potential dead-end risks of CSR and ESG than the current plight of Canada’s energy sector.
In a recent speech, the CEO of Husky Energy, Rob Peabody, described the oil bottleneck out of Alberta “the slowest train crash” he’s ever seen. “From about 10 years out, you could see it coming, and yet we walked right into it as a nation.”
More than a few corporations were on the train that produced the crash. But a specific example would be Royal Bank of Canada. CEO Dave Mckay recently told a Calgary audience Canadian oil needs better market access. “We need to continue to be bold and push forward on energy infrastructure.”
But Mckay did not describe how Canada ended up without new pipelines. Nor did he refer to Prime Minister Trudeau’s bold decision to kill the Northern Gateway pipeline to move Alberta oil to the West Coast through British Columbia’s Great Bear Rainforest. Said Trudeau: “The Great Bear Rainforest is no place for a pipeline.”
The rainforest should also be no place for bank CSR activities. But in 2008 RBC pledged $500,000 to the Tides Canada Foundation to help fund the Great Bear Rainforest protection racket. Tides, whose objective is to kill Alberta’s oilsands, raised millions to close off 64,000 square kilometres of B.C. forest. In other words, RBC’S corporate social responsibility — funded through its “Blue Water Project” — helped set up a rainforest that now serves as a barrier to getting Alberta oil to market.
The cost of the rainforest barricade is in the billions of dollars in lost revenue. “If Northern Gateway had come on as planned, we wouldn’t be in this situation,” Tim McMillan, CEO of the Canadian Association of Petroleum Producers, said this week.
Banks and corporations cannot be solely blamed for Alberta’s oil export crisis, but many played a role. The industry has its own share of CSR braggarts. Four that come to mind are Canadian Natural Resources, Suncor, Cenovus and Shell Canada. In 2014 they signed a deal with environmental groups and the Alberta government to limit oilsands carbon emissions.
RBC’S social responsibility team was at it again last week. As Peter Foster reported on this page last week, RBC was listed as a sponsor of “Indigenous Solutions for Environmental Challenges,” a conference in Banff over the weekend to glorify the illegal activities of green activists in Ecuador and their Canadian and U.S. court campaign against Chevron.
An RBC spokesperson said in an email that the bank’s sponsorship related to “sending a group of Indigenous youth to the conference who are interested in learning more about Indigenous approaches to land rights and conservation. It is part of our broader commitment to supporting youth in Canada by connecting them with learning and networking opportunities to help advance their careers.” After Foster’s report, however, RBC’S logo was removed from the otherwise radical roster of sponsors. I wonder why?
Corporate subservience to CSR and ESG is now an international phenomenon backed by an army of consultants, lawyers, activists, investor organizations and executives. ESG in particular has crept up the corporate hierarchy and is now endorsed by countless corporations, despite a lack of any evidence that ESG produces real benefits to shareholders or the economy. At best, the research is murky. One typical study of ESG in Europe concluded with a damp squib: “Overall, our evidence fosters the assumption that there is a business case to be made for corporate social responsibility.” Take that to the bank.
The idea that CSR and ESG have no business in the boardrooms of the nation — and that such activity can undermine the economy — is not new. In 1970, Nobel economist Milton Friedman devastatingly detailed the many risks associated with CSR as a model. The shortsightedness of business executives, he said, is exemplified in their speeches on social responsibility. “This may gain them kudos in the short run. But it helps to strengthen the already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces. Once this view is adopted, the external forces that curb the market will not be the social consciences, however highly developed, of the pontificating executives; it will be the iron fist of government bureaucrats.”
That seems like a pretty good outline of how Canada ended up with no new pipelines.