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1999 Report of the Commissioner of the Environment and Sustainable Development

Main Points

• Managing toxic substances and risks to our health. The federal government's policy objective is to permit the safe and productive use of chemical substances while safeguarding Canadians and their environment from unacceptable risks. While releases of many toxic substances into the environment have been reduced, our audit work identified a number of cracks in the federal infrastructure. They include poor interdepartmental co-ordination of research efforts, incomplete monitoring networks, unfulfilled commitments, a lack of re-evaluation of pesticides against new health and environmental standards, and a growing gap between the demands placed on departments and the availability of resources to meet those demands.

We also found that federal departments are deeply divided on many key issues. They do not share a common vision of how toxic substances should be managed. They disagree strongly on the degree of risk posed by some industrial chemicals, the interpretation of federal policy and the actions required to implement it, the relative merits of voluntary and regulatory controls, and the respective roles and responsibilities of departments. The behaviour demonstrated by some departments is a major impediment to the effectiveness of federal programs.

• Federal-provincial agreements to protect the environment. The federal government has entered into environmental partnership agreements with the provinces to reduce overlap and duplication. The seven agreements we audited cover activities such as inspection, enforcement, monitoring and reporting. We found that these agreements do not always work as intended: many activities that are essential to implementing them are not working as well as they could.

Before entering into these agreements, the federal government did not formally analyze and document the potential for failure, including whether both parties could do what they were agreeing to do. There is no ongoing analysis of the impact of the agreements on environmental performance or on the industries involved. The federal government does not have a documented plan in the event that a province is unable to carry out its assigned responsibilities or an agreement is terminated.

• The Arctic - a barometer of global environmental change. Canada has made a major contribution in the international efforts to enhance the understanding of the Arctic's unique environment and the actions needed to protect it. To meet Canada's commitments, scientists and program managers have been struggling with many of the same challenges discussed elsewhere in this Report: building a solid information base through scientific research and monitoring, managing jurisdictional complexity, developing a strong domestic regime for implementing agreements, and responding to budget cuts.
  
  Managers in other program areas could learn from this experience. An overall strategy for the North would also help federal departments and agencies to carry out their scientific research, monitoring and other responsibilities effectively and efficiently.

• Involving Canadians in policy development. We found a high level of satisfaction with the consultations that departments used to prepare their first sustainable development strategies. Participants generally felt that departments had listened; in turn, departments believed that the consultations had broadened their own perspectives. The result was better strategies, with more "buy-in". Nevertheless, we identified weaknesses that should be dealt with in the next round of consultations leading to the revised strategies due in December 2000.

• Learning from others. Organizations around the world have shown how their environmental performance can be improved by strengthening basic management practices. Managers recognize that building strategies - and hence organizations- that deliver economic, environmental and social value is essential to securing their future. We in government need to do the same.

• A work in progress. Departments are now in the early stages of turning their strategies into action. They are making progress in delivering on their commitments. However, the quality of the information they have provided varies widely among departments. Departments are also just beginning to establish practices to support the delivery of their strategies, and gaps exist in key areas. Departments need to accelerate their plans to put appropriate management systems in place, paying particular attention to staff training and continual improvement practices.

Introduction

Sustainable development challenges

6. All of these were signs of unsustainable development at the global level - an inability to care for people and, at the same time, the environment that supports them. Canada joined other countries in committing to ensuring that by 2002 - ten years after the Earth Summit - they would demonstrate measurable progress toward sustainable development. We have three years to go.

Managing for sustainable development

8. Exhibit 2 illustrates the type of model that many organizations are using to manage their environment and sustainable development agendas. Like other management models, the ISO 14001 standard that is presented is based on the "plan-do-check-improve" approach to strengthening an organization's performance. It was adopted as an international standard in 1996, and more than 100 Canadian firms have registered so far. Many more organizations in both the private and public sectors are using the standard to guide their management practices.

9. I believe that significant improvements can be made in protecting our environment and promoting sustainable development if sound management practices are applied to these issues. Use of the systematic approach to continual improvement embodied in standards like ISO 14001 would strengthen management practices significantly.

10. We can also look to concrete examples of how others are coming to grips with the challenges of sustainable development. Exhibit 3 describes how one company views global environmental and sustainable development challenges and their implications. Electrolux sees global growth in population, economies and resource use leading to more regulation, increased resource efficiency and greater market demand for environmentally friendly products. Environmental considerations form part of the business context - a stimulus to the company's strategic direction. They are not going to go away; but they provide the organization with a range of opportunities as well as challenges.

This year's Report

Managing Toxic Substances and Risks to Our Health

13. We have learned a great deal since 1962. Chapters 3 and 4 of this Report examine the federal government's management of toxic substances.

14. Canadians use large quantities of chemical substances every day, in pharmaceutical drugs, food preservatives, household products, industrial chemicals, agricultural and household pesticides, fuels and other products. These substances play a vital role in modern society. They have reduced the incidence of disease, increased food production and food safety, revolutionized manufacturing processes and provided consumers with many modern conveniences.

15. But substances that are released into the environment can ultimately find their way back to us through air, water, soil and food, and can affect our health. Industrial chemicals and pesticides in the environment have been linked to cancer, lung disease, reproductive problems and birth defects, allergic reactions, and lowered resistance to disease.

16. Toxic substances are a highly complex public policy issue: there are literally thousands of potentially toxic substances; they come from a variety of sources; opinions are divided on issues like risk, significance and burden of proof; the knowledge base is incomplete and still evolving. The lack of scientific understanding of the substances and their impacts leaves ample room for disagreement on what needs to be done about them.

17. Canada has established an elaborate infrastructure of scientific research and monitoring, regulations, policies and voluntary programs to manage the most dangerous toxic substances. The purpose of these activities is to permit the safe and productive use of chemical substances while safeguarding Canadians and their environment from unacceptable risks.

18. Our audit identified significant weaknesses in the federal government's assessment and management of toxic substances. We found poor interdepartmental co-ordination of research efforts, incomplete monitoring networks, unfulfilled commitments, a lack of pesticide re-evaluation in light of new health and environmental standards, conflicting departmental agendas and priorities, and a growing gap between the demands placed on departments and the availability of resources to meet those demands.

19. The federal government's cornerstone policy in this area, the Toxic Substances Management Policy, represents a potentially powerful and pragmatic approach to a complex and difficult issue. But it is not being acted on, nor is there a government-wide plan to do so. Strategies for the management of specific substances, although required by the Policy, have not been developed. Established government objectives are not being met.

20. I believe that taken together, these cracks in the foundation threaten the federal government's ability to detect, understand and prevent the harmful effects of toxic substances on the health of Canadians and their environment.

21. I am particularly concerned that federal departments are deeply divided on many key issues. They do not share a common vision of how toxic substances should be managed. They disagree strongly on such issues as the degree of risk posed by some industrial chemicals, the interpretation of federal policy and the need to take action on it, the relative merits of voluntary and regulatory controls, and their own respective roles and accountabilities.

22. In my view, the situation has gone beyond the healthy and constructive debate that is integral to the policy process. I believe that the behaviour displayed by some departments is a major impediment to the effectiveness of federal programs.

Working With Provincial Governments to Protect Our Environment

24. We audited seven federal-provincial environmental agreements under the Canadian Environmental Protection Act and the Fisheries Act . These agreements cover activities such as inspection, enforcement, monitoring and reporting. Some agreements suspend the application of certain federal regulations where there are equivalent provincial regulations; others provide for shared administration of regulations and a "single window" to government for industry. But regardless of who does what under the agreements, the federal ministers of the Environment and Fisheries and Oceans remain ultimately accountable to Parliament for the application of these Acts.

25. Federal-provincial environmental agreements offer the potential for better protection of the environment and streamlined administration and regulation by government. As requested by the Standing Committee on Environment and Sustainable Development, Chapter 5 asks whether the agreements are working. We conclude that they are not always working as intended; nor do many activities essential to implementing them work as well as they could.

26. Before it entered into these agreements, the federal government did not formally analyze and document the potential for failure, including whether both parties could do what they were agreeing to do. There is no ongoing analysis of the agreements' impact on the environment and on the industries involved. The federal government does not have a documented plan in place that describes how it would reassume its responsibilities should a province be unable to carry out its assigned responsibilities, or should it or a province decide to terminate an agreement.

27. The federal government is planning to enter into more bilateral agreements under the Harmonization Accord signed in January 1998 by all jurisdictions except Quebec. Environment Canada needs to evaluate the existing bilateral agreements and incorporate the lessons learned into any new ones.

The Arctic - A Barometer of Global Environmental Change

29. Pollutants transported by air and water currents over long distances from industrialized and agricultural regions of the world - pesticides, industrial chemicals and heavy metals - are one of the main threats to environmental quality in the Arctic. They persist longer in the Arctic than in southern regions, accumulate in the fatty tissues of fish and wildlife and attack a fundamental aspect of Aboriginal culture in the North - its reliance on traditional or "country" foods.

30. Canada has signed or endorsed more than 30 international initiatives that affect environmental quality in the Arctic. Chapter 6 reviews four of them that deal with wildlife management and transboundary pollutant issues. In those areas, Canada has made a major contribution in the international efforts to enhance the understanding of the Arctic's unique environment and the actions needed to protect it.

31. To meet Canada's environmental commitments in the Arctic, scientists and program managers have been struggling with many of the same challenges discussed elsewhere in this report: building a solid information base through scientific research and monitoring, managing jurisdictional complexity, developing a strong domestic regime for implementing the agreements and contending with budget cuts. Managers in other program areas could learn from this experience.

32. However, Canada has taken a piecemeal approach to fulfilling its international commitments in the North. There is no overall Northern strategy to guide federal departments and agencies in carrying out their scientific research, monitoring and other responsibilities effectively and efficiently. The success of Canada's overall efforts is vulnerable to program or funding decisions by individual departments that may have detrimental effects on programs of other departments.

Involving Canadians in Policy Development

34. Chapter 2 presents our assessment of one major consultation exercise by 28 federal government departments, as part of preparing their first sustainable development strategies. More than 1,600 organizations and Aboriginal communities were involved in helping departments identify priorities for sustainable development and how to achieve them.

35. Overall, among both participants and departments, we found a high level of satisfaction with the process. Participants generally felt that departments had listened to them and that their comments would be taken into account in the final strategies. In turn, departments believed that the consultations had broadened their own perspectives on the sustainable development issues they faced, and had increased the awareness of those issues inside and outside the department. The result was better strategies with more "buy-in".

36. A number of weaknesses were identified, however, that need to be dealt with in the next round of consultations leading to the strategy revisions due in December 2000. Three of the most significant weaknesses we found were limited co-ordination among departments, limited involvement of senior management and limited feedback to participants.

37. We also noted that most of the guidance provided to departments on conducting and evaluating consultations had been developed in the early 1990s, and much of it is still in only draft form. Given the federal government's re-emerging interest in public involvement, we believe these consultation "building blocks" need to be updated.

Turning Talk Into Action

Implementing sustainable development strategies

39. Departments are now in the early stages of strategy implementation. Chapter 1 provides our first assessment of their progress. According to their own reports, departments have so far completed about 11 percent of what their strategies said they would do. They are making progress in implementing their action plans.

40. However, the quality of the information that departments have provided varies widely. I expect that the quality of reporting will improve substantially as implementation proceeds, and as departments establish the clear and measurable targets we recommended last year. Parliamentarians, the public and departments themselves will then have a better picture of how the sustainable development strategies are unfolding.

41. Departments are also just beginning to establish practices to support the delivery of their strategies, and we note that there are gaps in key areas. As Exhibit 4 illustrates, the six departments we examined have applied about one third of the practices in the ISO 14001 standard that are relevant to sustainable development strategy implementation.

42. The exhibit provides an interesting perspective on the "implementation gap" - the gap between commitments made and concrete action taken - that I have referred to in previous reports. Compared against the ISO standard, departments' practices are strongest at the early stages of the management cycle, and become progressively weaker as departments move into implementation, monitoring and improvement. Departments have not yet systematically identified their priorities, defined responsibilities for achieving them, or established training needs. They are not reviewing progress in a way that would lead to steady improvement in their performance.

43. As a consequence, the current management practices for delivering the strategies do not yet provide assurance that departmental action plans will be implemented consistently or that the intended results of the strategies will be achieved. Departments need to act now to get their management systems into place.

Greening the federal government

45. Departments could realize substantial financial and environmental benefits by taking an integrated sustainable development approach to managing their operations. In only one aspect of departmental operations, energy use in buildings, we estimate that the government could save more than $300 million over 20 years. However, most departments are not yet in a position to collect the information they need to track their environmental performance and realize the potential benefits. There is also no consistent and comparable basis across departments for reporting to Parliament on progress in the "greening of operations" - and there should be.

46. Recognizing that its policies and programs have a much greater impact on sustainable development than its operations, the federal government has committed to integrating environmental, social and economic considerations into its decision making. Departments, however, have not fully come to terms with how they will do this in practice. This is relatively uncharted territory; through four case studies, we look at some of the tools that other jurisdictions are using.

Learning From Others

Managing for sustainable development in other organizations

48. For example, the Australian government recently commissioned an independent assessment of the way departments and agencies are implementing sustainable development (see Exhibit 5). Key impediments it identified include a lack of clarity about what sustainable development means for government policy, the complexity associated with scientific uncertainty and lack of information, poor policy-making practices, difficulties of co-ordination and the lack of a long-term planning process.

49. Chapter 7 examines why and how 17 organizations - in both the public and private sectors - are changing in response to the challenges and opportunities that sustainable development presents. The chapter is based on the understanding and experience of senior executives in these organizations.

50. Almost all senior managers we interviewed were convinced that given global trends in population growth, production and resource use, the environment will continue to be an important strategic consideration for organizations.

51. Increasingly, organizations are focussing on the social dimension of sustainable development and on what socially responsible management means to them. In the private sector, companies are looking at the impacts of their activities in areas like community incomes and health. In the public sector, managers are dealing with issues like promotion of health, nutrition and education, access to economic opportunity and social services, equity and human rights.

52. Even leading organizations are still in the early stages of thinking and acting on the social dimension of sustainable development. Unlike the environmental dimension, where there is more consensus on the issues and how to deal with them, the ability to integrate the social dimension into an organization's overall strategy is still in its infancy.

53. The managers we interviewed talked about the challenges posed by sustainable development, but also about the opportunities that it presents. Managers in both the public and private sectors said they were pursuing a sustainable development agenda for reasons of competitive advantage. A sustainable organization can retain customer loyalty and secure new markets, attract talent and address stakeholder concerns.

54. These organizations are using a range of tools to advance their sustainable development agendas. Managers are thinking in terms of "sustainable systems" - like sustainable building design and construction, energy, distribution - and are situating their organizations within them. They are addressing complexity by engaging outside experts and stakeholders to help the organization better understand the issues and their implications. They are building alliances to meet common objectives. And they are using training and awareness campaigns to overcome resistance to change. They believe that developing strategies - and hence organizations - that deliver economic, environmental and social value is essential to securing their future.

Our Work Plan

A focus on co-operation and co-ordination

57. The April 1999 Report of the Auditor General also examines collaborative arrangements, in general as well as for specific social programs. Managing these arrangements and other horizontal issues has proved to be a particular challenge for governments. In my next Report, I will build on this earlier work and make working together the key theme.

Review of sustainable development strategies

59. Last year, I identified three main challenges that departments faced:

• Implementing their strategies. Since the release of their strategies, departments have turned their attention to delivery. Each year, I will report on the extent to which departments did what their strategies said they would do. Using the ISO 14001 standard as our benchmark, we will continue to examine departments' management of strategy implementation.
• Establishing clear and measurable targets. Last year I recommended that departments establish a clear set of benchmarks to judge whether they are implementing their strategies successfully, and present them to the House of Commons in the spring of this year. I will include an assessment of those targets in next year's report.
• Preparing for the strategy update. Departments are required to update their strategies at least every three years, with the first update due by December 2000. I will issue a special report later this year setting out my expectations for the strategy update. The report will indicate how my staff and I will assess the next round of strategies.

Integrating the fourth "E" into the work of the Office

• The Office identified weaknesses in the environmental inspection program at the National Energy Board, inconsistencies between the management of climate change science and the Federal Science and Technology Strategy, and a lack of due diligence in managing environmental screenings of projects under Transport Canada's highway investment programs.
• Follow-up of earlier work done by the Office found continuing weaknesses in emergency preparedness, environmental stewardship, treatment of contaminated sites and completion of the national parks system.
• On a more positive note, the Office concluded that Public Works and Government Services Canada has been appropriately managing the environmental aspects of the Northumberland Strait Crossing Project.

• Smog. There are air quality problems in most of Canada's major urban centres and many rural areas. Air pollution has a significant impact on human health and the environment. The audit will examine the federal government's national leadership and management of its initiatives to reduce air pollution.
• Management of hazardous materials at National Defence. National Defence operates some of the largest industrial facilities in the country, including repair facilities, workshops and testing sites. These facilities use tons of paint, solvents, cleaners, petroleum, oil, and lubricants every year. The audit is intended to assess whether the Department is following good environmental practices in its handling of these materials.
• Management of the Pacific salmon fishery. This is the second of three audits dealing with Fisheries and Oceans' management of salmon in British Columbia. Our objective is to determine if the Department's processes and practices for salmon management are ensuring - with due regard to economy and efficiency - the conservation of the resource base and the sustainability of the Aboriginal, commercial and sports/recreational fisheries that depend on it.
• Canada Infrastructure Works Phase II. The Canada Infrastructure Works program was introduced as a temporary shared-cost program in 1994 to help local communities with the maintenance and development of infrastructure and the creation of employment. In January 1997, the federal government announced an extension of the program. One of our audit objectives is to determine whether compliance with federal environmental obligations is adequate.

Studies of special interest to parliamentarians

• Level playing field for energy sources. This study will examine federal tax treatment and other support of investment in non-renewable and renewable sources of energy and in energy efficiency.
• Federal-provincial/territorial co-operation and co-ordination. Through this study, we will document the range of mechanisms for federal-provincial/territorial co-operation and co-ordination on sustainable development issues.
• Co-operative arrangements in the private sector. Linked to our work on interdepartmental and federal-provincial co-ordination, we will review the arrangements companies make to formalize co-operation between firms so we can identify good practices and lessons learned for the federal government.
• Accounting for sustainable development. Work on this project will focus on departmental progress in using environmental performance measures for their own operations, incorporating environmental concerns into the federal government's procurement practices, and "greening" policy and program decisions.

The petition process

65. Under the process, a Canadian resident can send a written petition to the Auditor General. The petition is then forwarded to the appropriate federal minister for response. The minister has 120 days to respond to the petitioner.

66. During the year ended 31 March 1999, nine new petitions were received and sent to ministers for response. Seven of those petitions dealt with issues falling under the purview of the Minister of Fisheries and Oceans. Five of the petitions concerned environmental assessment. Appendix B provides information on the nature and status of the petitions.

Conclusion

68. My third Report to the House of Commons identifies some successes, some failures, some works in progress. Their common theme is the need to apply sound management practices to our environmental and sustainable development objectives. There are few quick solutions; what we need is persistence - sustained and focussed effort.