Some of the world’s leading corporations were criticized for failing “to disclose to financial investors how environmental and social issues pose strategic risks and opportunities for their businesses.”

Standard & Poor’s, an organization called SustainAbility, and the UN Environment Program have jointly released a report entitled Risk & Opportunity: Best Practice in Non-Financial Reporting. The report concludes that, of the top 50 corporations studied, only 3 disclosed the financial implications of key environmental and social risks, “despite this information being increasingly important to analysts, investors, lenders, insurers and re-insurers.”

This problem is not limited to big global corporations. Dogwood Initiative’s research indicates that BC resource companies also do a poor job of disclosing risks that could pose strategic threats to their businesses, particularly risks created by unresolved First Nations title and rights.

For example,

  • EnCana is one of Canada’s leading oil and gas corporations. In its 2003 annual report, the company provides less than a full picture of the risks it faces. Specifically, the company implies it has stronger interests in lands contested by First Nations than it has under the current law. EnCana also fails to indicate that First Nations are challenging their operations, and that First Nations’ challenges against other companies’ licences have been upheld by the courts:
    • EnCana consistently uses language that might create a false impression of its holdings. By using words like “$270 million purchase,” “acquired about 400 square miles of land,” “assembled 150,000 net acres … through purchases, land swaps and Crown land sales”,” EnCana implies it holds stronger interests than mere leases.
    • EnCana’s annual report also does not disclose any specific risks or liabilities associated with First Nations’ challenges to its operations. In fact, many BC and international indigenous groups are on record as opposing some or all of EnCana’s operations in their territories. EnCana also fails to disclose that recent decisions of the BC Court of Appeals have held that resource tenures granted without consultation and accommodation of First Nations are potentially invalid.
  • CanFor, the largest logging company in BC, does a better job than EnCana about disclosing the uncertainty created by the Delgamuukw and Haida court decisions, but:
    • Canfor doesn’t disclose any of the issues raised by specific First Nations opposing Canfor’s plans to log in their territories.
    • A majority of the First Nations affected by the recent transfer of Slocan’s tenures to Canfor have put the company on notice that it hasn’t fulfilled its court imposed duties. Since the reason Canfor provided affected First Nations – that security laws prohibited disclosure before the deal was complete – was recently rejected by the BC Supreme Court, certain aspects of the merger are at risk for a Haida-like challenge.
    • In fact, a number of First Nations have notified Canfor of their intent to pursue legal action, once the law is clarified in early November by the Supreme Court of BC, yet none of this is disclosed.

Other forest and logging companies fall between the examples of EnCana and Canfor. Our research has yet to identify a BC resource company that is fully disclosing the risks to its tenures created by unresolved First Nations title and rights issues.

Since the companies aren’t disclosing important risks, Dogwood Initiative (along with our First Nations and community partners) will educate key players in the financial markets about the true risks of operating in BC.

Related Monday Magazine article, Business Uncertainty