The risks to companies that fail to cultivate strong Indigenous relations are well documented, but few companies provide comprehensive disclosure of their policies, practices and performance on Indigenous relations
Environmental and social disclosures are finally reaching the finance and investment mainstream. Earlier this year, the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosure released recommendations for companies and investors to disclose information about climate governance, strategy, risk management metrics and targets in their financial filings. The report represents recognition from global finance leaders that climate change and financial risk are intertwined and that transparency is needed for investors to assess this dynamic at the company level. Governments, securities regulators, asset owners and companies are now wrestling with how to put these recommendations into practice.
Meanwhile, the European Union’s non-financial reporting directive now asks companies to report on their social and environmental policies and impacts in their annual reports, documents previously home to financial data exclusively. France has gone further, requiring companies to conduct and report on due diligence for human rights violations and environmental damages within their operations and commercial relationships. Even where social and environmental disclosure is not legislated, major institutional investors are increasingly demanding this information through frameworks such as the Sustainability Accounting Standards Board, the International Integrated Reporting Council and the Global Sustainability Standards Board, which provide for disclosure on a litany of indicators.
Yet, a key element is missing from all of these systems and sources: substantive disclosure on Indigenous relations. For companies operating in countries with Indigenous populations, clear and comprehensive information about their policies, practices and performance on Indigenous rights and relationships is essential for investors to assess risk and stability and predict future performance.
Some companies do provide case studies of one-off donations or localized training or employment in their corporate sustainability reports. Corporate filings to securities regulators often include staid text about the possible legal and operational risks of working on or near Indigenous territories. But, few companies provide comprehensive disclosure of their policies, practices and performance on Indigenous relations across operations.
The risks to companies that fail to cultivate strong Indigenous relations are well documented. Pipeline development in North America is a case in point. The Northern Gateway project faced substantial delays and litigation and was ultimately abandoned, due to poor consultation with Indigenous peoples and the severity of impacts to their territory and way of life. Similarly, at the heart of the protests and delay of the Dakota Access Pipeline (DAPL) was the inadequacy of engagement with affected Indigenous peoples, the destruction of sacred sites and burial grounds, and the impact of the project on the adjacent tribe’s water supply. By the end of 2016, Energy Transfer Partners, the operating partner in the DAPL project, had lost at least US$450 million in relation to the project. Litigation around DAPL continues. Indigenous rights-related risks are not unique to pipelines; they are raised by projects in mining, oil and gas, forestry, renewable energy and infrastructure.
The need for disclosure exists at all levels in the investment chain. This week, global institutional investors — representing total assets of over $2.67 trillion — wrote to the Equator Principles Association, the financial sector’s guidance-setting body on due diligence relating to environmental and social risk, calling for greater transparency from financial institutions about how Indigenous rights due diligence is conducted and for an end to the practice of exempting projects in developed countries such as Canada and the United States from review. The investor statement demonstrates an understanding that in most places local law is insufficient to protect Indigenous rights and that disclosure is needed from all sectors, including finance.
For companies operating in Canada, disclosure on Indigenous relations is all the more important in light of the truth and reconciliation process taking place. Following the release of the final report and the 94 “Calls to Action” of Canada’s Truth and Reconciliation Commission (TRC) on the legacy of residential schools in 2015, groups across Canadian society, from sports leagues to health providers, are taking a hard look at their current and historic activity and opening an honest dialogue about colonization, discrimination, responsibility and reconciliation.
Canada’s business sector is central to this process. Fortunately, the TRC set out a specific call to action for business to direct their action and reporting. It is worth reading in full:
i. Commit to meaningful consultation, building respectful relationships, and obtaining the free, prior, and informed consent of Indigenous peoples before proceeding with economic development projects.
ii. Ensure that Aboriginal peoples have equitable access to jobs, training, and education opportunities in the corporate sector, and that Aboriginal communities gain long-term sustainable benefits from economic development projects.
iii. Provide education for management and staff on the history of Aboriginal peoples, including the history and legacy of residential schools, the United Nations Declaration on the Rights of Indigenous Peoples, Treaties and Aboriginal rights, Indigenous law, and Aboriginal–Crown relations. This will require skills based training in intercultural competency, conflict resolution, human rights, and anti-racism.
Call to Action 92 provides guidance for companies to improve Indigenous relations. It also raises the stakes for both action and public disclosure. With the TRC report, businesses operating in Canada have become key actors in a national project of reflection and rebuilding. The government of Canada is taking steps toward implementing some version of the UN Declaration on the Rights of Indigenous Peoples, and court interpretation of Canadian state law inches in the same direction. Regardless of how Canadian law evolves in relation to the UN Declaration, for companies operating on Canada simple regulatory compliance does not cut it anymore. To avoid conflict, align with international legal principles, and meet societal and investor expectations, companies need to build the principles of the UN Declaration, and in particular free, prior and informed consent, into their modes of operation.
In Canada and around the world, we are entering a time where the prudent company is the company that secures Indigenous consent before beginning activities, involves Indigenous peoples as partners, and works with them to establish a clear framework for ongoing relations in order to renew and maintain relationships. For investors, strong Indigenous relations are a marker that a company is a stable investment, with management foresight, solid partnerships and prospects for sustainable growth.
As discussions around the FSB task force have made clear, corporations and investors already have difficulty defining metrics and indicators for climate-related reporting. Trying to report on something as intangible as a company’s relationships with diverse groups of Indigenous peoples may seem daunting. Nevertheless, it is critical.
Relationships are essential to business, particularly relationships with the governments and communities where a business operates. Companies that operate in Canada, or in any country that is home to Indigenous peoples, operate in the territories of Indigenous governments, in communities comprised of Indigenous peoples with histories in the land that go back millennia and will extend millennia into the future. How they relate to these peoples as partners, neighbours and employees is critical to their business success and their investors’ returns. What is more, it is critical to ensuring productive, sustainable and inclusive economies and to reconciliation in settler economies.