26705 - ECOM Agroindustrial Corp. Ltd.

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Environmental & Social Review Summary

Project Number

26705

Company Name

ECOM Agroindustrial Corp. Limited

Date ESRS Disclosed

May 16, 2008

Country

World Region

Region

Global

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 17, 2008
Signed : Jun 25, 2008
Invested : Sep 4, 2008

Sector

Coffee, Cocoa, Tea

Industry

Agribusiness and Forestry

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

In 2006, IFC provided a corporate loan to ECOM Agroindustrial Corp. Ltd., a commodity trading company with operations primarily in agricultural commodities such as cotton, coffee and cocoa, in Latin America, Asia and Africa as well as Europe and the United States. The IFC loan to ECOM was on-lent to producers supplying coffee to ECOM in Central America (mainly Nicaragua, Guatemala and Costa Rica). This loan funded improvement and technical assistance and training projects identified by ECOM and certification agencies to improve the productivity and sustainability practices of coffee producers. In addition IFC provided a TAAS facility co-funded by Nestle to support the certification of coffee farmers in Central America.

ECOM is keen to replicate the model developed in Central America for its operations in Asia and Africa and strengthen its supply chain in coffee and cocoa. IFC is considering providing a corporate Loan to ECOM of up to $55 million which will be used to finance permanent working capital and capital expenditures for the coffee value chain in Asia (Indonesia, Vietnam and Papua New Guinea), and Africa (Kenya, Tanzania and Uganda), with an allowance for a small portion of the facility to be used in the same countries for working capital for cocoa. To complement the IFC Investment, IFC is designing with ECOM an advisory project to start-up pilot farmer training centers in the same countries in Asia (Vietnam, Papua New Guinea and Indonesia) and Africa (Kenya, Uganda and Tanzania).

Overview of IFC's Scope of Review

IFC environmental and social specialists assessed operations of ECOM in Uganda (coffee) and Indonesia (coffee and cocoa). The company presented relevant environmental and social information which was reviewed and discussed with ECOM management. Based on the project description and environmental and social performance, an action plan has been agreed to ensure performance in compliance with IFC’s Performance Standards and IFC’s General Environmental, Health and Safety (EHS) Guidelines and IFC’s EHS Guidelines for Plantation Crop Production.

IFC’s review of this proposed investment included:

- a review of technical documentation and discussions with management regarding the environmental, health, safety, labor and social performance of ECOM and their supply chain (coffee, cocoa and cotton);

- a site visit to coffee plantations in Uganda; and

- a site visit coffee and cocoa plantations in Indonesia.

E & S Project Categorization and Applicable Standard

While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems.
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement

The findings of the review confirm the application of these Performance Standards and indicate that there are no impacts at this stage related to PS4: Community Health Safety and Security, PS5: Land Acquisition and Involuntary Resettlement, PS6: Biodiversity Conservation and Sustainable Natural Resources Management, PS7: Indigenous Peoples or PS8 - Cultural Heritage. In the event that these PS’s become applicable, ECOM will inform IFC for us to provide feedback and suggestions. Screening of these issues will be done as part of their environmental and social assessment.

Environmental and Social Mitigation Measures

ECOM will implement measures to address these impacts and to ensure that the project will, upon implementation of the specific agreed measures, comply with all environmental and social requirements (national laws and regulations and the IFC’s Performance Standards and relevant Environmental, Health and Safety Guidelines). Information about how these potential impacts will be addressed by ECOM is summarized below and in the Action Plan agreed with the client.

- PS1: Social and Environmental (S&E) Assessment and Management Systems.

IFC’s assessment considered the company’s management of its environmental, health and safety, and social performance in the operation of their subsidiaries and their supply chain; compliance with national and local requirements; and its engagement with local communities regarding environmental, health and safety performance.

Environmental and Social Assessment:

ECOM’s assessment of their supply chain and the countries in which they are expanding is done on an ad-hoc basis and will be systematized as part of the implementation of their management system. As part of their due diligence process in order to expand into new areas, ECOM will include criteria to ensure that impacts are managed in accordance with IFC Performance Standards and applicable IFC Environmental, Health & Safety Guidelines.

Management Systems:

ECOM is working toward "standardization" of their management system to provide consistent oversight of their operations and those of its subsidiaries globally. Their present management system setup does not provide the opportunity for ECOM to provide an overarching oversight of its operations globally. ECOM is working toward addressing this through a systematic process that includes a review of all their operations for compliance and consistency, training needs and implementation schedules. ECOM has a road map with specific goals and schedules which they have shared with IFC. ECOM has begun implementation of their approach in their Central America subsidiary in 2006.

The management system will provide an integrated platform for oversight of OHS, E&S and HR for operations globally, including their supply chain. Oversight functions will include ensuring compliance with local regulatory requirements and ECOM group policies through routine monitoring and training, and consistency in implementation of ECOM group policies and procedures. ECOM currently has an annual reporting format (yellow sheet) for some of its operations outside of the United States. Periodic reporting (such as monthly or quarterly) on OHS/E&S is not implemented for ECOM operations outside of the United States. Moving forward, after its review of its operations globally, oversight function for these on a routine basis and consistent with group policies will be included in the management system.

Currently at a subsidiary level, ECOM''s operations are largely decentralized with strong corporate oversight of commercial transactions provided by the ECOM office in the region. There is limited reporting to ECOM corporate on Environmental, Social or Health and Safety performance at the present time. Facilities managers are responsible to ensure that employees are adequately trained to perform their work safely.

Supply Chain:

One of ECOM’s competitive advantages is their origin certified coffee. ECOM is implementing an outreach program on their coffee operations which is based on the various certification schemes they adhere to. These certification schemes include AAA (Nespresso), Starbucks, Cafe Practices, Fair Trade, Organic, Rain Forest Alliance and UTZ Kapeh. Requirements to obtain certification under these schemes vary and may include establishing, standards for labor, working conditions, biodiversity conservation, quality, traceability of farmers, adequate payment for product and integrated pest management.

At the present time, ECOM relies on these certification processes for compliance with applicable ESH&S and labor regulations in countries in which they operate. Supply chain is managed differently in each country where they source their coffee, although the extent of difference varies. In Uganda where the internal control system is more advanced, supply chain of sustainable coffee is managed through a network of buying teams, 2 field supervisors and 22 field officers who visit registered farms at least on an annual basis and keep a detailed form on agrochemical use, yields estimate and other farming practices. In Indonesia the network is more loosely organized where ECOM does not have its own buying teams/collectors and 13 extension officers are hired to serve both as advisors and supervisors. There is a huge opportunity to improve the limited oversight that is currently provided by ECOM extension officers with regards to giving technical/agronomic assistance to farmers. IFC will collaborate with ECOM to design a more extensive and effective approach for improving quality and conditions of farmers.

The percentage of ECOM’s sustainable coffee has increased over the last three years and stands at 15% of their total traded volumes. The percentage of ECOM’s sustainable cocoa has increased to around 3% of their total traded volumes. ECOM is planning to increase the percentage of their certified commodities. ECOM recognizes that child labor may be present in the supply chain in the sectors they operate. ECOM will use best commercial efforts to address these issues in their supply chain.

In order to improve quality and environmental & social performance of their supply chain, ECOM needs to expand the requirements they are asking farmers to comply with, and include working conditions, health and safety, and environmental aspects. Monitoring of compliance with these requirements should be more systematic and be included as part of the company’s management system. Reporting on EHS aspects for ECOM’s supply chain needs to be more consistent and monitored at a corporate level in order to leverage best practices and ensure compliance with ECOM’s policies.

ECOM is also exploring the possibility of implementing farmer training centers. These centers will provide technical assistance to local farmers to support them in both improving productivity and obtaining relevant standards certification with a focus on:

- promoting sustainable coffee and cocoa production
- assisting farmers to achieve certified environmental/social production standards
- increasing coffee production and improving quality and increase incomes
- supporting development and production of other crops that are local to the region

Note on PS5: Land Acquisition and Involuntary Resettlement, PS6: Biodiversity Conservation and Sustainable Natural Resources Management, and PS7: Indigenous Peoples.

Although these Performance Standards are not applicable at the time of appraisal, some of the countries in which ECOM is planning to expand operations are known to have issues related to PS5, PS6 and PS7. ECOM will assess the significance of their direct impacts on all these issues and include criteria as an integral part of their Environmental and Social assessment process.

- PS2: Human resources and working conditions. IFC’s assessment considered terms of employment, as well as safe and healthy working conditions.

Human Resource Policy and Management:

Human resources are managed at the local offices with limited corporate oversight from ECOM. All human resources policies and procedures are reported to be consistent with local regulatory requirements. HR functionality will be included in the overall management system to provide oversight of all their operations globally, taking into account that ECOM has a highly decentralized operation with decision making taking place in subsidiaries. ECOM is building a salary database for its entire staff across globe. It is also building a performance management database using a new review form. Their goal is to implement best practices consistently through their operations globally. ECOM has a HR Policy and will update it in order to be in line with IFC Performance Standards.

The policy is included in employment contracts, and addresses working conditions, terms of employment, and wages and benefits. Employment relationships recognize the principals of non-discrimination and equal opportunity which is included in individual labor contracts. The minimum employment age at ECOM is 18 years. Benefits generally include at a minimum medical insurance, pension, leave, and transport allowance. A grievance mechanism will be developed at a corporate level and implemented in all subsidiaries.

Contractors and subcontractors are expected to comply with all local labor requirements specified in contractual arrangements. ECOM will ensure that contractors obey the provisions of IFC Performance Standard 2 and will monitor its compliance.

Non-discrimination and Equal Opportunity:

ECOM assesses employee performance based on merit, taking into account delivery of objectives and targets, work experience, and leadership potential. All promotions are reviewed by senior management.

Protection of the Workforce:

Child labor or forced labor is not employed directly at ECOM operations. It relies on certification programs for consistency with acceptable labor practices in the supply chain. ECOM will use best commercial efforts to address these issues in their supply chain.

Occupational Health & Safety (OHS):

OHS aspects are managed at different levels throughout ECOM operations. Management and performance of OHS will be improved by the implementation of a certified management system as per IFC Performance Standard 1. All employees have to undergo training at induction and subsequently on worker health and safety relevant to their job activity. Further training required to ensure to use of PPE for various activities.

- PS3: Pollution Prevention and Abatement.

IFC’s assessment considered ECOM’s operations with regard to emissions to water; management of solid waste; and implementation of an integrated pest management.

Wastewater treatment:

Effluents from ECOM’s operations include process wastewater where cocoa or coffee is subject to wet operations, sanitary wastewater and stormwater. Infrastructure and resources available for process wastewater treatment is limited and to the extent required under certification programs and in compliance with local regulatory requirements. Sanitary wastewater is treated in septic tanks and discharged to soil. Stormwater is discharged directly to public sewers where available. No public wastewater treatment systems are available in the areas where ECOM have operations.

Waste management:

Solid waste generated from coffee or cocoa processing activities includes organic and inorganic wastes. Organic material is typically reused as natural soil amendments and inorganic materials such as plastics; sacks etc. are sold to vendors for recycling.

Pest Management:

ECOM is piloting Integrated Pest Management (IPM) practices at some coffee plantations in Indonesia for control infestation of the coffee bean borer. Extension officers provide technical assistance in selection of inter-cropping methods and use of fertilizers and pesticides where inter-cropping is used. Other IPM alternatives are being assessed with similar infestations by cocoa bean borer in cocoa plantations. Products for export may be fumigated for pest control with Methyl Bromide, which is subject to Phase Out as ozone depleting substance, or Phosphine prior as required under client country regulations. Fumigation is carried out in the warehouses or in the holds of ships by licensed vendors and in compliance with local regulatory requirements for such activity. ECOM will present a phase out plan in order to restrict use of Methyl Bromide.

Stakeholder Engagement

ECOM’s operations require them to be in constant interaction with thousands of farmers across all regions. In the Asia and Africa region, ECOM’s interaction with these farmers is based on a commercial relationship and on the agronomic advice ECOM provides to the farmers that are on the different certification scheme. ECOM will leverage their experience in the coffee operations in Central American and ensure consistency across all regions. At a corporate level, ECOM has an outreach program called ECOM Foundation Development of Origin Resources (website: http://www.ecomfoundation.com/web/efweb.nsf?Open) and invite bids every year to participate in community development programs in countries where they operate.

The project’s environmental documents will be accessible at the following locations:

- ECOM Website (www.ecomtrading.com)

- ECOM’s Corporate Office in Singapore:
Address: 79 Robinson Road, #17-04/05/06 CPF Building, SINGAPORE 068897
Tel: +65-63189918, Fax: +65-63189916

The following Subsidiary Offices
Kawacom Ltd.
Address: Plot M284 Ntinda Industrial Area, PO Box 22623, Kampala, Uganda
Tel: +256 41 222611 / 9; Fax: +256 41 222612 / 8

PT Indo CafCo
Address: Kompleks Padi Mas jl.Tirtayasa, Bandar Lampung 35122, Indonesia
Tel: +62 721 350737; Fax: +62 721 351491

PT Tanah Mas Celebes Indah
Address: Jl. Salodong No. 58, Bulurokeng, Kec. Biring Kanaya, Makassar 90243, Indonesia
Tel: +62 411 511026;

Atlantic Commodities Vietnam Ltd.
8th Floor, 8 Nguyen Hue Street, District 1, Ho Chi Minh City, Vietnam
Tel: 84.8.8277.068 / Fax: 84.8.8277.069

Monpi Coffee Exports Ltd.
P.O. Box 1326, Goroka, EHP - Papua New Guinea
Tel: 675.732.2752; Fax: 675.732.1410

Mawenzi Coffee Exporters Ltd
Plot 1524, Msasani Peninsula, P.O. Box 23299, Oyster Bay, Dar es Salaam, Tanzania
Tel/Fax: +255 756 790 295

Sangana Commodities (K) Ltd.
PO Box 18126 00500, Kenbelt Industrial Park, Old Mombasa Road, Nairobi, Kenya
Tel: +254 (0)20 824650-2; Fax: +254 (0)20 823920

Client Documentation

File Name	Actions
ESAP.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

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