Shareholders applaud end of Nutrien’s Western Sahara sourcing

After intensive shareholder engagement, the new Canadian company is cutting its ties to controversial Moroccan company

After years of engagement by shareholders with Potash Corporation, Agrium Inc., and Nutrien, the company recently formed by their merger, the new company is finally ending its purchases of phosphate rock from the non-self-governing territory of Western Sahara.

Western Sahara is a former Spanish colony in North Africa that is classified by the United Nations as a “Non-Self Governing Territory”. Much of it has been occupied by Morocco since 1975, which has led to sustained conflict with the local Saharawi people. The United Nations has repeatedly affirmed the right of the Saharawis to self-determination. Moroccan control over the territory’s natural resources is a major point of conflict. In 2002, the UN under-secretary for Legal Affairs issued a legal opinion declaring that Morocco has no authority to engage in the exploitation of natural resources in Western Sahara if such activities are done in disregard of the interests and wishes of the Saharawi people, and a slew of recent legal decisions related to European trade as well as with the shipment of phosphate rock have highlighted the legal implications for companies purchasing natural resources taken from the territory.

Companies operating in or sourcing from conflict zones or countries with weak rule of law face serious risks to shareholder value, reputation and social license to operate, as well as potential legal risks, particularly if companies are seen as responsible for, or complicit in, human rights violations.

Institutional investors working with SHARE have raised concerns with the human rights implications of phosphate rock purchases repeatedly, including by filing shareholder proposals at both Agrium and Potash asking the companies to conduct and make public an independent assessment of its human rights responsibilities in relation to sourcing phosphate rock from Western Sahara.

We took those proposals to votes at both companies in 2015 and filed them again in 2016. And while Agrium eventually commissioned an assessment, the shipments of phosphate rock continued.

So did our engagement.

When the to companies merged to form Nutrien, the new company became the single largest buyer of phosphate rock from Western Sahara, intensifying the risks for Nutrien shareholders. Yet the merger also provided an opportunity to make changes in company operations which had previously hindered attempts to eliminate sourcing of phosphate rock from Western Sahara.

In discussions with merging companies, it became clear that a change was finally underway. Last year, even before the merger was complete, Agrium agreed to stop its purchases from the Moroccan supplier once its current contract ended. And recently, without public fanfare, Nutrien informed its Moroccan supplier that it will be cease all purchases at the end of 2018.

The underlying issues continue in Western Sahara. United Nations observers monitor the truce between Morocco and the Polisario Front. The territory remains in dispute and the Saharawi people continue to be largely exiled to nearby refugee camps. But with the conclusion of the Nutrien contracts, Morocco loses a customer responsible for half of the Western Sahara phosphate trade and observance of human rights for business is advanced.

Persistent shareholder engagement will continue to address the contribution that portfolio companies make to the corporate responsibility to respect human rights and reinforce the important role of institutional investors in addressing abuses wherever they occur.

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