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2004 October Report of the Commissioner of the Environment and Sustainable Development

Main Points

4.1 Overall, our audit found a low level of commitment in departments and agencies toward conducting strategic environmental assessments, despite the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, which was first issued 14 years ago. The results of our audit, taken together, suggest that most departments have not made serious efforts to apply the directive. In fact strategic environmental assessment is far from meeting its promise in guiding policy, plan, and program development.

4.2 We found major gaps in how the directive is being applied. A number of the 12 departments we examined have put in place few of the basic management systems needed to comply with the directive. The three departments we evaluated in detail have conducted few strategic environmental assessments in the years we examined (2000, 2001, and 2002), and their completeness varies. Tracking of assessments has been inadequate, so departments cannot show that they have conducted all of the strategic environmental assessments required.

4.3 The overall application of the directive does not provide assurance that environmental issues are assessed systematically, so ministers and the Cabinet can receive sufficient information to make informed decisions on proposed policies, programs, and plans. Knowing the potential environmental impacts in advance would provide an early opportunity to adjust or modify their approach to protect the environment and human health, and to reduce future economic costs.

4.4 A number of main factors are adversely affecting the performance of departments and agencies in implementing this directive. We found insufficient commitment by senior management in some departments, which impedes the development of necessary management systems to implement the directive. In addition, no central department or agency has been tasked with the responsibility and authority to monitor the departments' and agencies' compliance with the directive and to ensure that there is adequate quality control of the assessments that are undertaken. There is limited integration of assessments into decision making.

4.5 The 1999 Cabinet directive does not require assessments to be made public, but in January 2004 a public reporting requirement was introduced. Since 1999, few of the assessments completed have been made public.

4.6 Some departments have made progress in implementing the directive since 1999. We observed examples of senior management commitment and leadership in some departments (Transport Canada, Industry Canada, Natural Resources Canada, and the Department of Foreign Affairs and International Trade). We also observed some examples of good practices that could be emulated by departments and agencies to improve their compliance with the directive.

Background and other observations

4.7 The federal government has indicated it is committed to environmental excellence in its own operations and to the goal of sustainable development. According to the Clerk of the Privy Council, "the Government of Canada is committed to integrating sustainable development in its plans, policies and programs." He notes that "this requires that decision-makers have good information and advice on the potential environmental, social and economic impacts of proposed initiatives."

4.8 In line with these commitments, the Cabinet directed federal departments and agencies, through a directive, to conduct the environmental assessment of new proposed policies, programs, and plans, so that informed decisions can be made about them.

4.9 Within the directive, ministers expect federal departments and agencies to assess the potential environmental impact of initiatives bound for Cabinet or ministerial approval. They "expect strategic environmental assessments to be conducted . . . when a proposal may result in important environmental effects, either positive or negative."

The government has responded. The departments and agencies have generally agreed with our recommendations. Their responses, including the actions they are taking or intend to take to address the recommendations, are set out in the chapter.

Introduction

Importance of environmental assessment

4.10 An environmental assessment is an examination of projects, programs, policies, plans, or activities at the planning stage to ensure that before they are approved, the potential effects on the environment receive careful consideration. An environmental assessment is a critically important planning tool, given the potential for serious and irreversible damage to the environment that can result from some human activity. Failure to consider and reduce adverse environmental effects before carrying out an initiative or undertaking can lead to significant environmental degradation, damage to human health, and economic costs.

4.11 The consequences of inadequate environmental foresight were illustrated in one of our previous reports on the high clean-up costs and environmental damage at abandoned mines in the North. Aquaculture in Canada also may cause pollution and impacts on fish and wildlife that could result in future clean-up costs and economic effects. (See photograph)

4.12 Strategic environmental assessment—federal commitment to integrating the environment into decision making. The Government of Canada is committed to environmental excellence and sustainable development. It has also committed to integrated decision making, both domestically and internationally, for example, through Agenda 21—a comprehensive plan of action adopted at the United Nations Conference on Environment and Development (1992), and the Convention on Biological Diversity (1992). Essentially, integrated decision making involves taking environmental, social, and economic aspects into account when a decision is made.

4.13 The main tool the Government of Canada has to integrate environmental considerations into new policies, programs, and plans is the strategic environmental assessment. The requirement to conduct these assessments was put in place through a Cabinet directive in 1990, which was revised in both 1999 and 2004 (complete text of the 1999 directive, along with revisions instituted as of 1 January 2004). The assessment of physical projects that have or require federal involvement, such as road construction and waste facilities, is a separate process and is governed by the Canadian Environmental Assessment Act.

4.14 Assessment of proposed policies, programs, and plans is being applied internationally. A number of countries and organizations, such as the Netherlands, the United Kingdom, Norway, Denmark, and the World Bank, have made formal provisions for strategic environmental assessments of policies, plans, and programs and have carried out different types of assessments. For example, the Netherlands has required environmental assessments of specific plans and programs under its 1987 Environmental Impact Assessment Act. The European Union has issued a directive on the assessment of certain plans and programs, and member states have to comply with it by July 2004.

Importance of the directive has been repeatedly emphasized

4.15 When the revised Cabinet directive was issued in 1999, key departments and agencies within the federal government received a letter from the Clerk of the Privy Council, the most senior official in the federal civil service. The letter expressed dissatisfaction with action to date: "The Government [of Canada] will look for environmental implications to be more fully integrated into proposals prepared for Ministers and for Cabinet consideration. . . . There is a clear expectation that renewed, and more consistent efforts, will be made across all departments."

4.16 In June 2003, the House of Commons Standing Committee on Environment and Sustainable Development tabled its report, Sustainable Development and Environmental Assessment—Beyond Bill C-9. Bill C-9 amended the Canadian Environmental Assessment Act in 2003. The report reaffirmed the importance of strategic environmental assessment but noted various problems with its implementation to date, including public reporting, and recommended that it be legislated.

4.17 The Government of Canada responded that it was modifying the Cabinet directive on strategic environmental assessment to include a requirement for the public reporting of environmental effects. This was to assure stakeholders and the public that environmental factors have been appropriately considered when decisions are made. It also committed to consider the remaining Standing Committee comments and recommendations, in conjunction with the findings of the Commissioner on strategic environmental assessment reported in this chapter and the recommendations received by the Minister of the Environment from his Regulatory Advisory Committee.

4.18 In early 2004, the Clerk of the Privy Council stated in his foreword to the revised 1999 Cabinet directive (2004) that the Government of Canada was "committed to integrating sustainable development in its plans, policies and programs." He noted that this would require that "decision-makers have good information and advice on the potential environmental, social and economic impacts of proposed initiatives."

Environmental assessment and its place in the policy life cycle

4.19 Combined with social and economic analyses, an environmental assessment for a policy initiative is supposed to inform the decision-making process. The purpose of strategic environmental assessment is essentially to help us to avoid making environmentally costly mistakes before a particular course of action is decided. It is a tool that enables the policy-maker to analyze systematically the environmental impacts of a proposed policy, program, or plan. Applying this tool rigorously will increase the chance of anticipating, preventing, or mitigating negative environmental consequences, or enhancing any positive impacts. Just like a project environmental assessment allows the decision maker to reach better-informed decisions about the consequences of a specific project, the strategic environmental assessment provides the decision maker with environmental information that could reduce the environmental costs that could follow from a particular policy, plan, or program.

4.20 For example, if the federal government develops a policy on offshore oil exploration and development, it needs to think about the social and economic ends that it wants to accomplish. The objective may be to increase the gross domestic product, energy exports, and/or employment opportunities for instance. The government also needs to consider the social and economic factors that will affect the policy's success. These could include, for example, compatibility with other economic activities such as fishing and tourism, downstream benefits to local and provincial economies, impacts on First Nations, and potential disruption of local communities. The government also needs to understand the environmental implications of the decisions it is making, for example, disturbance of marine life by seismic surveys, damage to marine habitat from drilling waste, and cumulative impacts on fish stocks and marine mammals. Ultimately, the government makes decisions based on the social, economic, and environmental information that is provided and its own priorities. (See photograph)

4.21 Once a policy is developed and the strategic environmental assessment completed, the results should be considered in the development of any related programs and plans. Ultimately, these assessments should provide the framework for the environmental assessments that may be conducted for individual projects under the Canadian Environmental Assessment Act. A strategic environmental assessment could identify overall mitigation measures or types of technology that would have to be incorporated into all project environmental assessments and put into practice when a project is implemented. Exhibit 4.1 compares the differences between a strategic environmental assessment of a policy, program, or plan and an environmental assessment of a project.

Federal responsibilities in applying the directive

4.22 The 1999 Cabinet directive applies to all departments and agencies. It states

Ministers expect a strategic environmental assessment of a policy, plan or program proposal to be conducted when . . . the proposal is submitted to an individual Minister or Cabinet for approval; and implementation of the proposal may result in important environmental effects, either positive or negative.

4.23 The accompanying guidelines indicate that departmental and agency officials "are responsible for ensuring that environmental considerations are properly integrated into the development of policy, plan and program proposals." Roles are also assigned to Cabinet itself, all ministers individually, the Minister of the Environment, and specific roles for Environment Canada and the Canadian Environmental Assessment Agency.

4.24 The Canadian Environmental Assessment Agency, according to the directive's guidelines, will "in support of the Minister of the Environment, . . . promote the application of strategic environmental assessment to policy, plan and program proposals of the federal Government." In addition, the Agency "will provide guidance and training to improve the implementation of the strategic environmental assessment of policies, plans and programs."

4.25 Environment Canada is responsible for consulting with "other departments and agencies and providing expert policy, technical and scientific analysis and advice on sustainable development and the potential environmental effects of policy, plan and program initiatives."

Past audit observations—slow and unsatisfactory progress

4.26 In our 1998 Report, Chapter 6, Environmental Assessment—A Critical Tool for Sustainable Development, we concluded that departments and agencies had been slow to implement the 1990 Cabinet directive. We recommended they improve their compliance. In our 2000 follow-up report, we noted that the Canadian Environmental Assessment Agency, in collaboration with an interdepartmental team, had made efforts to strengthen and clarify the Cabinet directive. However, we found that improved compliance had yet to be demonstrated, and we evaluated the progress to date as unsatisfactory.

Focus of the audit

4.27 Application of the directive. The principal focus of this audit was to determine whether the federal government is applying the 1999 Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. We assessed the following 12 departments and agencies against one or more of three sub-objectives (see About the Audit at the end of the chapter):

• Agriculture and Agri-Food Canada
• Canadian International Development Agency
• Citizenship and Immigration Canada
• Department of Foreign Affairs and International Trade (non-trade initiatives)
• Environment Canada
• Finance Canada
• Fisheries and Oceans Canada
• Health Canada
• Industry Canada
• Natural Resources Canada
• Public Works and Government Services Canada
• Transport Canada

4.28 We also looked at the roles and responsibilities of four federal organizations with cross-departmental roles: the Canadian Centre for Management Development (now the Canada School of Public Service), the Canadian Environmental Assessment Agency, the Privy Council Office, and the Treasury Board Secretariat.

4.29 We identified selected examples of good practices in strategic environmental assessment to highlight potential areas of practice improvement in departments and agencies.

4.30 Meeting commitments. The secondary focus of our audit was to assess progress made by federal departments toward specific commitments related to strategic environmental assessments made in their sustainable development strategies. A number of departments and agencies have made commitments related to strategic environmental assessments in their strategies. We focussed our attention on the commitments made by Agriculture and Agri-Food Canada, Industry Canada, and the Treasury Board Secretariat in their 2001–2003 strategies.

4.31 For more information on our objectives, scope, approach, and criteria, see About the Audit at the end of the chapter.

Observations and Recommendations

Directive's application far from complete

4.32 Our past audits have found that departments and agencies were slow to implement the directive and that progress over time was unsatisfactory. In this audit we found that since the directive was updated in 1999, the results have been mixed. We also observed mixed progress by the three departments in meeting specific commitments in their sustainable development strategies (Exhibit 4.2). In addition, we have some concerns with certain departmental responses to a petition on strategic environmental assessment (Exhibit 4.3).

4.33 As we have indicated, this audit adopted a three-tier approach to assess whether the federal government is applying the directive.

• Twelve departments and agencies were audited on their preparedness to apply the directive in their organizations through the design and documentation of key management system elements relating to accountability, screening, tracking, guidance, and training.
• Six of these departments were assessed on whether they are taking steps to implement these systems.
• Finally, three of these departments were assessed to determine if they are conducting assessments when needed.

Additional details on this approach and how departments and agencies were selected are contained in the About the Audit at the end of the chapter.

Some departments are lacking basic management system elements

4.34 Management systems are key to ensuring that tasks are completed and that records for follow-up, monitoring, and evaluation are kept. As departments and agencies are expected to comply with the directive, deputy heads are ultimately accountable for ensuring that required systems are put into place. Key elements of a management system include accountabilities, screening, tracking, guidance, and training. Exhibit 4.4 provides the outline of a generic system for conducting strategic environmental assessments.

4.35 Of the 12 departments and agencies we audited, three do not have most of the basic management systems in place—Fisheries and Oceans Canada, the Canadian International Development Agency, and Health Canada. Three other departments stood out as having generally satisfactory systems in place when we started our examination—Transport Canada, Industry Canada, and the Department of Foreign Affairs and International Trade. The remaining departments fall somewhere in between. All 12 departments and agencies have room for improvement. Almost all departments and agencies revised their systems during the course of our audit, and two departments started putting systems in place after our audit began. The detailed results by department are contained in Exhibit 4.5.

Implementation of necessary management systems is mixed

4.36 Four of the six departments we assessed were able to provide evidence that they were satisfactorily implementing their management systems—Industry Canada, Natural Resources Canada, Department of Foreign Affairs and International Trade, and Transport Canada. Agriculture and Agri-Food Canada has only achieved some progress to date in implementing the management system elements we assessed. Fisheries and Oceans Canada has conducted a few strategic environmental assessments; however, it has done little in terms of implemented systems and has poorly documented systems. As of March 2004, Fisheries and Oceans Canada had prepared a draft strategic environmental assessment manual. The detailed results by department are contained in Exhibit 4.6.

Gaps in coverage in applying the directive

4.37 We assessed whether three departments (Industry Canada, Transport Canada, and Agriculture and Agri-Food Canada) were conducting strategic environmental assessments when required. These departments had identified over 500 proposals (including memoranda to Cabinet, Treasury Board submissions, and others) that they had submitted for approval by their minister or by the Cabinet in 2000, 2001, and 2002. There is some overlap as several proposals may relate to the same initiative.

4.38 None of the departments could show that they had screened (or conducted a preliminary assessment for) all proposals that had been put forward to ministers or the Cabinet to see if a strategic environmental assessment was required. In terms of detailed strategic environmental assessments, the three departments were able to provide us with evidence that a total of 12 assessments had been completed during those years.

4.39 Tracking systems were deficient until recently. Our audit found that Agriculture and Agri-Food Canada has limited data available for those years, as it only started developing a tracking system for strategic environmental assessments in 2004. Industry Canada and Transport Canada did not have fully functioning tracking systems during the period from 2000 to 2002; however, tracking had improved by 2002. Therefore, the three departments could not demonstrate that the 12 strategic environmental assessments conducted were the only ones needed during that period.

Completeness of assessments varies

4.40 We looked at the 12 completed strategic environmental assessments to see whether they met key elements identified in the directive's guidelines. These elements included identification and analysis of key environmental issues, identification and discussion of proposed options and mitigation measures, and need for consultation and follow-up.

4.41 Transport Canada's Strategic Highways Infrastructure Program is an example of a fairly complete assessment. However, all the assessments we reviewed were missing at least a few key elements which were identified in the directive's guidelines. Few of the assessments reported on the need for, or the results of the consultations relevant to the strategic environmental assessment. Other shortcomings included a lack of reference to follow-up requirements.

Good practices identified

4.42 Good practices exist in some federal departments. Some departments have developed processes to implement the 1999 Cabinet directive and have conducted strategic environmental assessments. Some departments developed separate stand-alone systems, while other departments like Industry Canada integrated the requirements into existing systems. We found good examples of accountability structures, documented guidance, on-line guidance, and strategic environmental assessment screening and tracking systems in the departments and agencies we assessed (Exhibit 4.7). Most of these practices have been developed in the past three years.

4.43 Overall, Transport Canada's documented strategic environmental assessment system has most of the elements that enable it to conduct strategic environmental assessments. The Department's Strategic Environmental Assessment Policy Statement was put in place in 2001. It affirms the Department's commitment to strategic environmental assessments, provides guidance, and describes relevant accountabilities. The Department has developed additional guidance and training materials, which it subsequently reviewed in March 2004 with the introduction of public reporting requirements into the directive on 1 January 2004. The Department has also developed a comprehensive tracking system to monitor activity on strategic environmental assessments.

Main factors contributing to the performance gap

4.44 Why is there still a performance gap? Fourteen years after the first directive was issued, we expected that all departments would have, at the very least, basic systems in place. Overall, there are varying degrees of commitment to the directive. Some departments have developed well-thought-out systems, while others were just developing system elements during the later stages of our audit. Some of the strategic environmental assessments we reviewed were fairly robust while others were quite limited. In some cases, there were no strategic environmental assessments for proposals that would potentially have environmental impacts, for example, Finance Canada's Bill C-48 (Exhibit 4.8). Based on our audit work, we believe that there are a number of main factors that have contributed to this performance gap.

Insufficient senior management commitment to the directive

4.45 Varying commitment by senior management. We expected that senior management would convey their commitment by clearly communicating the importance of the issue to the organization. Commitment would also be conveyed by a clear articulation of the expected outcomes. The organization would also put sufficient resources and personnel in place to address the identified outcomes. Lastly, senior management would verify that the commitments and expected outcomes had been met.

4.46 In some departments, there is limited evidence that senior management have committed to fulfilling their obligations under the Cabinet directive. Departments that have shown clear senior management commitment, such as Industry Canada, Natural Resources Canada, Department of Foreign Affairs and International Trade, and Transport Canada, have made the most progress in applying the Cabinet directive. The Minister of Industry noted, in his response to a petition on strategic environmental assessment in 2003, that "strategic environmental assessments play a positive role in helping to integrate environmental considerations into decision-making." Transport Canada's Strategic Environmental Assessment Policy Statement notes that strategic environmental assessment is an essential component for an "integrated decision-making framework." Departments that have made the least progress, for example, Fisheries and Oceans Canada, the Canadian International Development Agency, and Health Canada, show little evidence of senior management commitment.

4.47 Recommendation. Deputy heads, of all departments and agencies included in this audit, should ensure that their organization is fully implementing the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals. They should ensure that their organization has a management system in place for the proper application of the directive. This system should include the following steps:

• Identify and describe proposals that require approval by the departments' or agencies' minister or the Cabinet.
• Establish an organizational accountability structure.
• Develop and implement tracking systems to track all proposals subject to the directive, preliminary scans, and detailed assessments that are conducted.
• Provide internal guidance and training to managers and staff who are involved in the preparation of policy, program, and plan proposals.
• Establish quality control, consultation, communication, follow-up, and evaluation procedures.

Deputy heads of all departments and agencies not included in this audit should take into account this recommendation when considering how their organization applies the directive.

Government's response. Strategic environmental assessment is one of a number of tools, including sustainable development strategies, laws (such as the Canadian Environmental Assessment Act), and policy instruments (including international environmental agreements), that require federal officials to consider the environmental implications of their recommendations to decision makers.

As part of their ongoing commitments, deputy heads are required to ensure that the Cabinet directive is implemented within their organizations, and that appropriate management systems consistent with the Commissioner's recommendations are put in place by December 2005. In establishing such systems deputy heads must consider organizational requirements, efficiencies to be gained through interdepartmental co-operation, and value for money.

Timeline for completion of action(s):

• Management Systems—December 2005

Lack of central ownership and support

4.48 No central monitoring and quality control roles assigned. According to the directive's guidelines, departmental and agency officials are responsible for ensuring that environmental considerations are properly integrated into the development of policy, plan, and program proposals. To ensure compliance with the directive, departments and agencies need to implement appropriate management systems, ensure that assessments are conducted when required, and assess the quality of their assessments.

4.49 The directive and its guidelines do not assign overall responsibilities for monitoring compliance with the directive to ensure that deputy heads are held accountable. The responsibility for overall quality control to ensure that the assessments that are conducted are credible in the eyes of decision makers has not been similarly assigned. Nor has the responsibility been assigned for reviewing the application of the directive to allow for the continuous improvement of the directive itself and its application. None of the four federal organizations with cross-departmental roles we assessed has systematically taken on these tasks.

4.50 In its 2003 report, the House of Commons Standing Committee on Environment and Sustainable Development noted that the "Privy Council Office has declined responsibility for implementing the 1990 and 1999 Cabinet directives, relying on the Canadian Environmental Assessment Agency, which has virtually no authority to ensure that federal departments (let alone ministers) comply." It noted that the Privy Council Office, "which serves as the prime minister's department as well as the secretariat for Cabinet, must take a leadership role if strategic environmental assessments are to be effective."

4.51 To ensure that deputy heads are complying with the directive, central agencies have a number of options. Monitoring compliance could take the form of central agencies going into departments and agencies to assess compliance with the directive, or departments and agencies could prepare regular reports on their compliance, which a central agency would receive and review.

4.52 For quality control, the current system relies on departments to assess the quality of the proposals developed and on departments and ministers to raise outstanding issues during interdepartmental and Cabinet meetings. We found that in some cases departments provided quality feedback on their own specific assessments. In other cases, departments could not demonstrate that this quality feedback had been provided. This contrasts with the Netherlands, for example, where the Environmental Impact Assessment Commission is mandated to review the quality of environmental assessments that have been conducted and to issue an opinion on them. Quality control could take the form of a central agency reviewing the quality of all key assessments or setting specific standards and ensuring that adequate quality control has taken place within the organizations conducting the assessments.

4.53 Canadian Environmental Assessment Agency fulfilling assigned roles. Our audit work found that since the 1999 Cabinet directive was introduced, the Agency has made an effort to engage other departments in applying the directive and to promote and educate government officials about it. This has included the use of a variety of tools, including presentations and marketing materials. The Agency has chaired an interdepartmental committee on strategic environmental assessment and has led the preparation of additional guidance on the Cabinet directive. In addition, it organized a two-day workshop on strategic environmental assessment in March 2004 that was attended by over 125 participants from over 25 federal organizations.

4.54 The majority of the departments assessed during our audit stated that they believe the Agency is carrying out its roles and responsibilities with respect to the directive, and they are satisfied with the quality of the guidance and support the Agency has provided to them.

4.55 Recommendation. The Privy Council Office, as the central authority responsible for the machinery of government, should ensure that responsibilities and authorities have been assigned for

• central monitoring of compliance with the Cabinet directive on an ongoing basis,
• adequate quality control of the assessments undertaken, and
• continuous improvement of the assessment process.

The Privy Council Office should ensure that these responsibilities are being fulfilled and ensure the results are used to hold deputy heads accountable for implementing the directive.

Government's response. Consistent with the federal government's commitment to self-assessment, in line with recommendation 4.47, departments and agencies will continue to be accountable for the quality of their analysis and will establish appropriate management systems to ensure accountability and quality control. When proposals are submitted to Cabinet for decision, central agencies have an important challenge function to play. The Canadian Environmental Assessment Agency will support central agencies in this role and continue to provide support to departments and agencies with respect to implementation of the directive. Departments and agencies will continue to be accountable for the quality of assessments of proposals that are submitted to individual ministers for decision, and that are not subject to Cabinet process, and will report on them, as necessary.

With respect to quality of analyses, the expertise required to provide this function does not reside within just one federal organization. Rather, expertise in the areas of environmental management, environment and human health, and natural resources management is distributed among a number of federal organizations. These expert organizations should be consulted, as necessary, by departments and agencies conducting strategic environmental assessments.

The National Science Advisor will be consulted to assist in securing expertise within or outside of the government.

Timeline for completion of action(s): Immediately

Limited integration into decision making and assessment of effects

4.56 Departments sometimes treat a strategic environmental assessment as a separate, isolated track, or "silo," which is not integrated with other analyses. This may result in missed opportunities to use the assessment, in conjunction with other social and economic analyses, to influence the development of subsequent policies, programs, plans, and projects. The preparatory work for Transport Canada's initiative, Straight Ahead—A Vision for Transportation in Canada, included multiple lines of research work and consultations, but these were not incorporated into the strategic environmental assessment that was conducted.

4.57 Under the Cabinet directive guidelines, a strategic environmental assessment is required at only one stage of the government's consideration of a proposal or undertaking. A department can decide not to do another assessment (or not to update its assessment) if one has already been prepared, even though the initiative may have changed considerably over time.

4.58 We found that departments sometimes had trouble grappling with doing a one-time-only strategic environmental assessment, given the reality that there are many decision points for response to any issue. Ideally, a strategic environmental assessment would be integrated into decision making over the life cycle of the undertaking, which could include policies, plans, programs, and projects.

4.59 Doing an in-depth assessment when the specifics of a program have not yet been developed is sometimes not realistic. Departments sometimes wait to do the assessment at a later point. Agriculture and Agri-Food Canada did not conduct strategic environmental assessments on the Agricultural Policy Framework prior to the federal-provincial-territorial agreement-in-principle on an action plan in June 2001. Most of the strategic environmental assessments were not conducted before the Agricultural Policy Framework was submitted for Cabinet approval in 2002 but were completed before Treasury Board funding approval was sought in 2003. In other cases, departments are doing the high-level assessment earlier on, to help them set a program's direction but are not following this up, when they have specific directions (for example, the Program for Sustainable Aquaculture, see Exhibit 4.9). (See photograph)

4.60 We did find a few examples in which there was a follow-through of analysis from a high-level strategic environmental assessment to more specific decisions.

4.61 Natural Resources Canada completed a strategic environmental assessment of its Wind Power Production Incentive in spring 2002. The assessment found that some significant negative environmental effects could be reduced by siting turbines away from natural habitats, bird-migrating corridors, and human settlements. (See photograph)

4.62 The Department prepared a guide for conducting project assessments that covered the issues raised in the initial strategic environmental assessment. This highlighted important environmental issues, so that they would not be missed when decision makers reviewed project applications. The project environmental assessment for the Cypress Wind Power Project in Saskatchewan included measures to reduce negative effects, for example, locating wind turbines at least 1,000 metres from the nearest residence to minimize noise disturbance and limiting their construction during sensitive bird-breeding and nesting periods.

4.63 Transport Canada's strategic environmental assessment for the Strategic Highway Infrastructure Program stated that environmental assessments should be conducted "at the regional level for those provinces with numerous projects in a given region." To ensure environmental protection, it would also be necessary to conduct specific assessments at each site. The regional strategic environmental assessment for the British Columbia Lower Mainland Border Crossing Projects was undertaken in January 2003 to meet this requirement. (See photograph)

4.64 Has the directive had an impact? In 1996, the Canadian Environmental Assessment Agency conducted a review of the implementation of the 1990 Cabinet directive. Since the 1999 Cabinet directive was put in place, a few departments have assessed their systems. However, to date there has been no formal evaluation of the impacts or barriers and the success factors in the implementation of the directive.

4.65 Generally, departments and agencies do not know how the strategic environmental assessments they have done have affected the decisions made, and, in turn, what the ultimate impacts on the environment are. Information on the impacts of strategic environmental assessments and an assessment of the directive's implementation should be required before the next review of the Canadian Environmental Assessment Act by 2010. This review is a mandated requirement under the Act.

4.66 Recommendation. The Privy Council Office, as the central authority responsible for the machinery of government, should ensure that an evaluation of the Cabinet directive is completed by the end of 2008 in time for the next review of the Canadian Environmental Assessment Act. The evaluation should report on the status of implementation by all departments and agencies and the main elements addressed in our chapter. In addition, the evaluation should report on the impacts that strategic environmental assessments have had on the policies, programs, and plans developed for ministers and the Cabinet. The results of this evaluation should be made public prior to the Act's review. Based on the evaluation, the Privy Council Office should examine the design of the Cabinet directive and consider whether legislation is warranted.

Government's response. The Privy Council Office, in collaboration with federal departments and agencies, will ensure that an evaluation is completed by 2008. The results of the review will be made public and will inform decisions about the form and structure of the Cabinet Directive.

Timeline for completion of action(s):

• Terms of Reference—January 2007
• Interim Report—October 2008
• Final Report and Public Release—December 2008

Transparency generally absent in directive's application

4.67 The process is not transparent—a double standard? The directive does not require that Canadians and parliamentarians be given access to strategic environmental assessments. There are three main reasons for enhancing the transparency of the strategic environmental assessments that are undertaken.

• First, the more transparent information is, the better its quality becomes. Greater scrutiny generated by public exposure can prompt greater care in the preparation of the information.
• Second, if the assessments are made available publicly, Parliament and the public have additional information for an informed debate on the potential impacts of policies, programs, and plans.
• Third, such disclosure provides assurance that the key options have been considered and potential impacts mitigated—essentially holding each department to account for the adequacy of the analysis undertaken.

4.68 To date, only a few strategic environmental assessments under the directive have been made public, and no public registry exists. These include the assessments that were prepared for the G8 Summit and the World Trade Organization's Doha Round of Negotiations (Exhibit 4.10). The Safety Net Review, which was prepared under the Farm Income Protection Act, has also been made public. The Standing Committee on Environment and Sustainable Development came to similar conclusions in its 2003 Report. It noted that it had "difficulty assessing the current level of compliance with the revised 1999 Cabinet directive given that virtually no information about strategic environmental assessments is publicly available."

4.69 This is in sharp contrast with the Canadian Environmental Assessment Act and its public registry of project-level environmental assessments, which have been carried out. It is also in contrast with the process for the Regulatory Impact Analysis Statement for new regulations, which gives parliamentarians and Canadians the opportunity to review the analysis and comment on it.

4.70 Effective 1 January 2004, the 1999 Cabinet directive was modified to include a requirement that "departments and agencies shall prepare a public statement of environmental effects when a detailed assessment of environmental effects has been conducted through a strategic environmental assessment." The intent is to "assure stakeholders and the public that environmental factors have been appropriately considered when decisions are made."

4.71 This modification reintroduces an element of the original 1990 Cabinet directive and associated guidelines, which was removed when the directive was revised in 1999. It is too early to tell how it will be implemented. However, the directive's guidelines do not provide any specifics as to what should be included in a public statement. As well, the public statement is not required for key policies, programs, and plans that did not require a strategic environmental assessment. There is no requirement for a rationale to be provided when no assessment is required. Lastly, it does not specify how these public statements will be made public.

4.72 Recommendation. The Canadian Environmental Assessment Agency should develop and implement an easily accessible public registry of public statements on strategic environmental assessments. Departments and agencies would retain responsibility for the quality, timeliness, and accuracy of posted information. This registry should provide the following information:

• A list of major approved government policies, programs, and plans where preliminary assessments determined that no strategic environmental assessment was required, along with the rationale for why no assessment was conducted.
• Key information on strategic environmental assessments for which consultations on an initiative are ongoing or which have been approved by ministers or the Cabinet. This information would include key environmental impacts identified, a summary of the results of analyses undertaken, the results of any consultations, and whether any follow-up is required—elements which are identified in the directive's guidelines. In addition, the registry should include all strategic environmental assessments that are publicly released.

Government's response. As noted in the Commissioner's Report, the directive was amended in January 2004 to provide for improved transparency, focusing on improved transparency for those initiatives likely to be of greatest concern to the public.

Federal departments and agencies, under the leadership of the Canadian Environmental Assessment Agency, will work over the coming year to ensure that public statements of environmental effects are easily and centrally accessible. The effectiveness of the requirement for public statements will be assessed as part of the evaluation (Recommendation 4.66) to be completed by 2008.

Timeline for completion of action(s):

• Guidance on Public Statements (Canadian Environmental Assessment Agency)—November 2004
• Terms of Reference for Working Group to examine options for access to public statements—December 2004
• Draft report on options for access to public statements—March 2005
• Implementation of options for access—September 2005
• Evaluation of public statement requirement—December 2008

Directive guidance is incomplete

4.73 The current guidance is incomplete and leaves unclear a number of issues that need to be considered. We expect that these issues will be considered in the evaluation we recommended (see paragraph 4.66).

4.74 The directive's guidelines are advisory, and some departments are treating them as voluntary. When Cabinet authorized the directive it also authorized the accompanying guidelines.

4.75 While good practice requires that management systems be set up, the directive's guidelines do not have a specific requirement that departments and agencies set up the management systems needed to implement the directive. As noted earlier, only some departments have most of the basic systems in place.

4.76 During the course of the audit we heard from some departments that everything they do is sustainable development and that analysts are normally taking the environment into account when developing policy proposals. Unfortunately, some departments could not credibly demonstrate that they are prepared to and actually are applying the directive. Without a systematic approach, departments may be missing opportunities to identify and enhance positive impacts and options and to mitigate negative environmental impacts.

4.77 Directive's application not defined by some departments. The directive indicates that it applies to policies, plans, and programs that may have important environmental effects. Some departments, like Industry Canada, have determined what types of initiatives could potentially require a strategic environmental assessment. Some departments have not clarified which of their initiatives normally would require a strategic environmental assessment.

4.78 A number of situations fall outside of the directive. In conducting the audit, we were struck by a number of situations that seemed to fall outside of the directive itself, but that could have environmental impacts, both positive and negative, depending on the circumstance.

4.79 Some initiatives can be years or even decades old, and have undergone significant modification. The directive leaves it unclear how such initiatives are assessed.

4.80 As indicated previously (paragraph 4.57), the directive's guidelines require a strategic environmental assessment to be conducted at only one stage of the government's consideration of the issue. A memorandum to Cabinet, that is, a proposal seeking Cabinet approval, may be followed by one or more submissions to the Treasury Board requesting funding. Between the two, a number of things might occur: changes to the proposal may have been made, updated information may be available to inform the analysis, or the funding allocation may have changed. The directive is unclear how these changes should be addressed within the proposals that are put forward and their accompanying strategic environmental assessments.

4.81 The case of the federal Budget—who assesses it? A federal Budget is a compendium of existing and new initiatives. Finance Canada indicated that the Budget does not need to be assessed under the directive because individual items are either continuing elements not subject to the directive or are new and should have been assessed by the departments and agencies responsible for those items. With the limited number of strategic environmental assessments conducted and the performance gap in implementing the directive, it is doubtful whether the potential environmental impacts are fully assessed when a federal Budget is constructed.

More training capacity is needed

4.82 At a technical level, some departments have developed good guidance and training to support their strategic environmental assessment efforts (for example, Industry Canada, Department of Foreign Affairs and International Trade, Environment Canada, and Transport Canada). Other departments and agencies have a more limited approach (for example, Finance Canada, Health Canada, Canadian International Development Agency, and Fisheries and Oceans Canada).

4.83 Training and guidance are needed to make managers and policy analysts aware of their responsibilities under the directive and to give them the knowledge and skills necessary to conduct strategic environmental assessments.

4.84 Since strategic environmental assessment is a key federal component of the policy development process, we would expect that the Canadian Centre for Management Development (the federal government's key training organization for senior managers and now incorporated into the Canada School of Public Service), would have reflected the directive in its policy courses. To date, the strategic environmental assessment is not reflected in the policy courses offered at the Centre, nor has the Centre assessed how the Cabinet directive could impact its curriculum.

4.85 Recommendation. The Canada School of Public Service should assess how the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals could be referenced in the courses it offers to senior managers in the federal public service. At the very least, all policy courses should refer to the directive.

Government's response. The Canada School of Public Service (which includes the former Canadian Centre for Management Development) has completed a preliminary assessment, which shows that the directive may be referenced in about 11 courses—including 6 policy courses—in the curricula of the School's Leadership, Public Administration and Professional Development Centres.

The courses are the following: From Modern Comptrollership to the Management Accountability Framework, Integrated Risk Management, Challenges of Public Policy Development: An Overview, Leading Policy, Orientation to Public Policy Development, Orientation to Public Policy Implementation, Public Policy Development—Intermediate Level, Public Policy Implementation—Intermediate Level, Green Procurement: A Sustainable Development Approach, Disposal of Surplus Moveable Crown Assets and Investment Recovery, and Procurement and Material Policy Framework.

Following a final assessment to be done this autumn of how the directive can be referenced or otherwise dealt with in the candidate courses, changes will be made to either content and/or materials to ensure the directive is referenced or dealt with in the fiscal year 2004–05 in up to 11 candidate courses. In some courses such changes, though thought to be relatively low cost, may be subject to the availability of funds.

The adequacy of this approach will be assessed.

Timeline for completion of action(s): March 2005

Conclusion

4.86 It has been 14 years since the first directive was issued by the Cabinet. The results of our audit, taken together, suggest that most departments have not made serious efforts to apply the directive. There are still significant gaps in its application, and some departments just began to implement elements of a management system during the course of our audit. Only one of the three departments we assessed has achieved satisfactory progress in meeting its sustainable development strategy commitments concerning strategic environmental assessment.

4.87 A limited number of strategic environmental assessments have been conducted in three departments we examined in detail (Agriculture and Agri-Food Canada, Industry Canada, and Transport Canada), and none has covered all of the key elements we had expected to see in an assessment. In addition, none of these departments could show that they had screened all proposals that had been put forward to ministers or the Cabinet to see whether they warranted a strategic environmental assessment.

4.88 Currently the directive's application does not provide assurance that environmental issues are assessed systematically. Ministers and the Cabinet may not receive sufficient information to make informed decisions on proposed policies, programs, and plans. If there are potential important environmental effects, the directive is quite clear that departments and agencies are expected to apply it to initiatives that are bound for the Cabinet or that require ministerial approval.

4.89 The main reasons for this uneven application are insufficient senior management commitment to the directive, lack of central ownership and support, limited integration into decision making and assessment of impact, lack of transparency in the directive's application, incomplete guidance, and mixed availability of training.

4.90 No department or agency in particular has been tasked with the responsibility and authority for the overall monitoring of compliance with the Cabinet directive. Nor has a department or agency been tasked with the responsibility and authority for quality assessment and continuous improvement of the assessment process.

4.91 However, we observed that senior management in some departments (Transport Canada, Industry Canada, Natural Resources Canada, and the Department of Foreign Affairs and International Trade) have made firm commitments to implement the directive. Some departments have made clear progress in implementing the directive since the 1999 edition. We observed some examples of good practices that other departments and agencies could use to improve their practices and implement required systems.

4.92 Deputy heads of all departments and agencies need to ensure that their organizations are implementing the Cabinet directive. They also need to ensure that their departments and agencies have a management system in place for the proper application of the directive. In addition, the current system needs to be strengthened so a department or agency has the responsibility and authority for monitoring compliance with the directive and for ensuring that adequate quality control of the assessments is undertaken.

4.93 These and other concerns reported in this chapter need to be dealt with before ministers and the Cabinet can be assured that they are receiving sufficient information to make informed decisions. If improvements cannot be demonstrated within several years, a statutory requirement for strategic environmental assessment, as is the case with the environmental assessments of projects, may need to be considered by the Government of Canada.

About the Audit

Objectives

1. To determine whether the federal government is applying the 1999 Cabinet Directive on the Environmental Assessment of Policies, Plans and Programs (that is, strategic environmental assessment)

Sub-objectives:

1.1 To assess whether selected federal departments and agencies are prepared to address the requirements for a strategic environmental assessment within their organizations.

1.2 To assess whether selected federal departments and agencies are managing key aspects of the strategic environmental assessment process.

1.3 To assess whether selected federal departments and agencies are conducting strategic environmental assessments when required.

1.4 To assess whether government-wide strategic environmental assessment roles and responsibilities are defined and followed by four central organizations of the federal government.

2. To assess the progress made by selected federal government departments and agencies towards specific sustainable development commitments on strategic environmental assessment related to, and in the context of, their sustainable development strategies.

Scope and approach

While the 1999 Cabinet directive applies to all departments and agencies, the audit focussed on 12 entities with a variety of mandates within the economic, social, and environmental spheres. We also looked at the roles and responsibilities of four central federal organizations. The results of our preliminary audit work informed the selection of departments and agencies to be audited. They were also selected to provide the audit with breadth and depth in its overall assessment of the federal government's application of the directive.

We assessed 12 departments and agencies to see if they were prepared to address the directive in their organizations through the design of key management system elements relating to accountability, tracking, guidance, and training. Subsequently, six of these departments were chosen to be evaluated as to whether they are making progress in implementing the necessary systems required to manage their assessment work. Lastly, three departments were assessed to determine if they were undertaking assessments when required. These departments were chosen based on our preliminary audit work, which indicated that their management systems were sufficiently developed for this audit work to take place.

The 12 departments and agencies and corresponding audit objectives they were assessed against are identified in Table 1. Each of the audit objectives also had a series of criteria against which performance was evaluated, and these are identified in Table 2.

During the course of the audit, we identified selected examples of good practices of strategic environmental assessment to highlight potential areas of practice improvement among departments and agencies.

In December 2003, the government announced a major reorganization of some departments and agencies.

• The international trade services operations of the Department of Foreign Affairs and International Trade were transferred to the newly created International Trade Canada. The remaining organization operates as Foreign Affairs Canada. The results of the audit are reported against the Department of Foreign Affairs and International Trade and not against the two new departments.
• The Canadian Centre for Management Development was incorporated, along with Training and Development Canada and Language Training Canada, into the Canada School of Public Service on 1 April 2004.
• The 1999 Cabinet directive was revised on 1 January 2004. Performance against the new requirement for preparing a public statement of environmental effects was not evaluated in this audit.

Some quantitative information in this chapter is based on data drawn from various federal and other sources. We are satisfied with the reasonableness of the data, given their use in our chapter. However, the data have not been audited, unless otherwise indicated in the chapter.

Audit team

Principal: Neil Maxwell
Director: Richard Arseneault
Chapter Author: George Stuetz

Véronique Dupuis
Mathieu St-Onge
Erin Windatt

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