FROM POTASH TO PLAYGROUND
City benefits from Potash Corp
In the summer of 2011, Potash Corp. of Saskatchewan paid an undisclosed sum to become the title sponsor of what is now called the PotashCorp Fringe Theatre Festival. It’s one of dozens of local causes that bear the fertilizer giant’s name and rely on its money.
Since its formation as a Crown corporation in 1975 and initial public offering in 1989, PotashCorp has given hundreds of millions of dollars to the community. Longtime Fringe director Robert Wyma said the Saskatoon-based company’s contributions are of enormous value.
“I think it’s one of the best fits that we’ve discovered as a community,” Wyma said in an interview. “It doesn’t feel like a sponsorship. At the end of the day, for us, it feels like a community investment that trickles down to an impact that we’re both proud of.”
Wyma wouldn’t disclose how much PotashCorp has given to the Fringe over his 13-year tenure as its director, but said its “significant and continuing” investment in it and other local organizations, especially over the last five years, has made a big difference in the city.
“We get to build a city through those activities. … We build a vibrant, dynamic background for the citizens of Saskatoon to enjoy Saskatoon,” he said. “(The Fringe) is a part of that, obviously, but not the only part.”
PotashCorp is likely the largest corporate donor in Saskatoon, if not the entire province. Since 2010, the company — which operates half of the province’s potash mines — has spent US$134 million on what it calls “community investments,” according to its financial documents.
In 2015, the last year for which complete data is available, PotashCorp spent US$28 million on sponsorships and donations to local organizations and causes. That works out to 2.2 per cent of the US$1.27 billion it reported earning over the same period.
By comparison, Cameco Corp. — the only other public company in Saskatoon on the same scale as PotashCorp — says it aims to give one per cent of its after-tax earnings to community groups. Last year, Cameco made $65 million on $2.75 billion in revenue.
PotashCorp has given money to local causes since its formation, but its profile — reflected by the number of signs bearing its name — has grown dramatically since 2010, when the Anglo-Australian mining giant BHP Billiton launched a $40-billion hostile takeover bid.
Community investment was one of seven pillars outlined in the company’s “Potash Pledge,” issued amid BHP Billiton’s ultimately doomed takeover bid. The pledge said that PotashCorp is “committed to … being the No. 1 corporate citizen in Saskatchewan in terms of philanthropic giving.
“In the case of PotashCorp, this would include commitments to major projects which would promote excellence in education, enhance access to the best in medical care and provide Saskatchewan residents with improved recreational facilities,” it said.
The main motivation of every publicly-traded company is profit, which equates to value for shareholders, but there are many good reasons why companies give money to their communities, said Jason Aebig, a partner in the Saskatoonbased public relations company Creative Fire.
While there are many community relations strategies, high-profile donations and sponsorships are a tried and tested method of building a “social licence to operate,” a “trust account” of goodwill that can be added to when business is good and drawn down in times of need, Aebig said.
“Hopefully, people with whom you’ve now developed a relationship will give you the benefit of the doubt,” he said. “They believe your intentions are good. They know that you are a serious and trustworthy company. … The risk (of not investing) is that you don’t build any trust with your stakeholders.”
PotashCorp has attempted to build that trust by giving around US$30 million each year to local arts organizations like the Fringe and charities like the Friendship Inn, donating cutting-edge equipment to the city’s hospitals, and contributing to public projects like the revitalization of Kinsmen Park.
That project, which began in 2010, ended up costing PotashCorp $7.5 million, plus $1.5 million from Canpotex Ltd. Former mayor Don Atchison said last year that PotashCorp Playland at Kinsmen Park, as it’s now known, wouldn’t have been built without corporate investment.
The future of PotashCorp’s local investments became less certain this summer when the company announced it planned to merge with Calgary-based Agrium in response to what its CEO, Jochen Tilk, called “fierce” market conditions.
Potash prices have fallen sharply since 2008, causing companies in the fertilizer business to respond by cutting costs. Over the last year, PotashCorp has shuttered one mine, reduced production at others, and laid off miners at its Cory operation west of Saskatoon.
The US$26-billion merger, which is expected to close next year, will result in the still-unnamed new company having two offices: a head office in Saskatoon and an office in Calgary. Aebig said while a head office’s location shapes community investment, nothing is certain.
“There’s no funding that flows to a charity that is guaranteed, whether it’s a government grant or a philanthropic donation or a sponsorship,” he said. “There’s always a risk that an organization puts way too much stock in one revenue stream, has expectations that it will flow uninterrupted into the future.”
At the same time, resourceextraction companies are particularly sensitive to the communities in which they operate because of a perception that natural resources belong to the people who live on them, he said. Any company that fails to pay attention, does so at its peril, he added.
Although many details of the merger have yet to be made public, PotashCorp has already started reassuring local organizations that the company remains committed to Saskatoon.
“That won’t change,” PotashCorp spokesman Randy Burton said in an email. “We put great emphasis on our communities and being an active and supportive corporate citizen. … Each company’s best practices in corporate social responsibility will be carried into the new company. It will maintain commitments to community involvement and investments.”
Wyma said that, while questions about what the merger will mean are likely “top of mind” for dozens of local organizations, he doesn’t have any reason to expect a dramatic change in the company’s commitment to Saskatoon.
“PotashCorp has continued to commit to support the Fringe Festival, so from that perspective, a check mark was pretty easy to garner,” he said.
“(But) I think that, as they move ahead, and they spoke quite frankly to me … there were questions obviously to be answered in the future that couldn’t be answered today.”