While all Performance Standards 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: Assessment and Management of Environmental and Social Risks and Impacts

PS2: Labor and Working Conditions

PS3: Resource Efficiency and Pollution Prevention

PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

This is a Category B project according to IFC’s 2012 Policy on Environmental and Social Sustainability because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Key E&S risks and impacts from McCormick’s third-party suppliers are those related primarily to agricultural production. The most significant of these impacts are related to labor practices, including child labor, forced labor and occupational health and safety (fair employment and safe working conditions). Other environmental risks may include the handling and use of chemicals (pesticides and fertilizers) and impacts on biodiversity due to expansion of agricultural production and induced deforestation.

McCormick’s supplier management system considers potential Environmental Health and Safety (EHS) and human resources (HR) risks and impacts of suppliers in the aspects related to PS1 (Assessment and Management of Environmental and Social Risks and Impacts), PS2 (Labor and working conditions), elements of PS3 (Resource Efficiency and Pollution Prevention) in the audit process; and elements of PS6 (Biodiversity Conservation and Sustainable Natural Resource Management) are considered in McCormick’s Sustainable Agriculture Policy and in the Sustainability Farm Assessment (SFA) and/or Rainforest Alliance (RFA) certification process. The suppliers to be financed within this Project all entail existing processing facilities and procurement from existing smallholder farmers. Since no vendor greenfield facilities will be financed, the impacts related to PS5 (Land Acquisition and Involuntary Resettlement); PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are not expected. Suppliers’ impacts are limited mostly to their premises and no impacts to local communities are expected, therefore PS4 (Community Health, Safety and Security) issues are not expected. 

IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives.

E&S Management Program. McCormick conducts its business in compliance with applicable law, and in an ethical and socially responsible manner and is committed to ensuring that the agricultural raw materials in its products are produced responsibility and requires that its agricultural supply chain partners comply with high E&S standards. This also includes ensuring the sustainability of farming communities, which entail the smallholder farmers that account for the supplier base of the Suppliers.

McCormick is committed to mitigating the impacts of its operations on communities and the environment through its sustainability framework (known as Purpose-Led Performance - PLP). In its 2019 report, McCormick reiterated performance targets to be met by 2025, which are informed by the UN Sustainable Development Goals (SDGs) in three key areas: people, communities, and the planet. In terms of its suppliers, McCormick is committed to: i) increasing the resilience of 90% of smallholder farmers that grow key iconic herbs and spices, as measured by increasing skills and capacity, income, access to financial services, education, and nutrition and health; and ii) sourcing all herbs and spices sustainably, beginning with 100% of McCormick’s branded iconic ingredients, which would be independently certified. McCormick is in the process of implementing its own third-party verified sustainability certification, Grown for Good, which will go beyond sustainable production criteria to incorporate elements around improving farmer livelihoods and promoting women’s empowerment. The company aims to positively impact 35,000 farmers through programs that uplift and strengthen their communities by 2025.This also includes empowering women across the supply chain by mapping the contributions of women on-farm in 100% of iconic ingredient sourcing communities by 2025.

McCormick’s commitments are embedded in its Sustainable Agriculture Policy, which builds upon other social and environmental standards and guidelines including the Vendor Code of Conduct, Business Ethics Policy, and Slavery and Human Trafficking Statement for the UK Modern Slavery Act. It sets forth McCormick’s general principles and expectations for the production practices of agricultural suppliers. As the E&S conditions of the agricultural supply chain are continuously evolving, McCormick periodically reviews its policies to ensure that they remain relevant.

McCormick has developed a Global Supplier Code of Conduct (2019) to clarify its global expectations in the areas of business integrity, human rights, health and safety and environmental management. This applies to all suppliers and vendors as well as other providers of goods and services who conduct business with McCormick entities worldwide. The company expects all its suppliers to engage in responsible supply chain practices as outlined in its Supplier Code of Conduct and to comply with local and national food safety laws and regulations governing all phases of the production process (pre-harvest, planning, harvesting, processing, and transporting). McCormick expects that all agricultural suppliers to take steps to ensure that agricultural products can be traced back to their source of origin. Adherence to McCormick’s Supplier Code of Conduct is stipulated in the terms and conditions of purchase orders with vendors and suppliers. Furthermore, McCormick’s expectations for Suppliers are outlined in the company’s Supplier Expectations Manual, which is pending further revisions, and include the following areas: quality systems, sanitation and pest control, Hazard Analysis Critical Control Point (HACCP), handling/storage/control, traceability, and supply chain management.

To support improvement in the livelihoods and social conditions of farmers and ensure the long-term health of people, communities and the planet, McCormick proactively encourages farming communities that adopt best practices that meet the company’s own Grown for Good standards or those of external certifying bodies, such as USDA organics or the Rainforest Alliance, which is an integral element of meeting its 2025 target of 100% sustainably sourced branded iconic ingredients (vanilla, red pepper, black pepper, oregano, and cinnamon). Through its strategic vendor alliance partners, McCormick implements awareness raising and training programs designed to build the technical capacities of farmers, enhance their agronomic practices and general business and farm management skills, and expand their access to financing mechanisms and market information through technology.

McCormick is implementing digital platforms such as Farmforce or SmartFarm through its primary vendors as part of its traceability and farm management system approach to enhance farmer livelihoods, community development, and the sustainability of the overall crop production cycle through monitoring of inputs and outputs in real time. This enables traceability back to the farm gate across the five iconic ingredients and McCormick estimates that in 2019, a significant share of its 2025 target in red pepper (60%), vanilla (35%), black pepper (24%) and oregano (5%) are traceable and sustainably sourced. All McCormick’s branded iconic ingredients are expected to be 100% sustainably sourced by 2025.

IFC has reviewed McCormick’s sustainability framework (PLP), its sustainability sourcing framework (G4G) and the scope of issues addressed in its Global Supplier Code of Conduct (2019) and Sustainable Agriculture Policy, which was found to be largely aligned with IFC’s Performance Standards, in particular Performance Standard 2 (Labor and Working Conditions). In addition, significant efforts to address environmental aspects of smallholder farmers aligned with Performance Standard 3 (Resource Efficiency and Pollution Prevention) and Performance Standard 6 (Biodiversity Conservation and Sustainable Natural Resource Management) are described later in this document.

In terms of supplying black pepper from Vietnam, McCormick is piloting its approach with the farmers of three vendors’ supply chains and expects to expand and scale this up to more farmers, including additional vendors. To date, over 1,300 black pepper farmers have been trained on innovative agricultural farming techniques, responsible use of agrochemicals, and Rainforest Alliance standards, 30% of whom are women. Almost 3,000 ha of pepper farms are being managed sustainably, which means that suppliers will obtain Rainforest Alliance (RFA) certification for these farms. The first drip irrigation systems have been implemented in five demonstration farms in the area, reducing farmers’ costs by 30 to 40% through reductions in water, electricity, labor, and fertilizer use.

IFC’s AS intervention will also help strengthen the capacity of McCormick’s suppliers by building the capacity of their field extension teams and also 150 selected farmer promoters so that jointly they will be able to provide technical assistance to a minimum of 1,700 farmers to support the adoption of improved black pepper farming practices. Farmers are expected to receive training on the following topics: application of best practices and innovations in pepper production, safe use of pesticides, water use efficiency, soil conservation, waste management, post-harvest practices all geared at reducing input costs. As part of the IFC AS project, more farmers will become certified under McCormick’s Grown for Good Sustainability Standard or one of its equivalent benchmarked certification schemes, and this will also entail a farmer monitoring process to ensure they have adopted sustainable agriculture practices. As a result, it is expected that 90% of trained farmers will obtain certification and the environmental footprint will be diminished.

Commodities are processed by McCormick facilities or by strategic vendors and follow best international practices related to food safety and McCormick has received the highest rating possible as a Safe Quality Food Certified Supplier. As outlined in McCormick’s Supplier Expectations Manual, Suppliers of ready-to-eat products are required to undergo thirdparty quality systems and food safety audits. Based on the material risk level determined by McCormick, suppliers of high-risk materials are to be re-approved annually; medium risk-materials every two years; and low-risk materials every three years. The reapproval is done either by documentary review or by physical audit. The preferred third-party certifications are the Global Food Safety Initiative (GFSI) recognized schemes such as BRC, FSSC 22000, SQF, and IFS.

McCormick expects that its suppliers will provide relevant information concerning any impacts to local communities and the environment. Any grievances at the farmer level can be addressed through the grievance mechanisms being put in place, as part of the Rainforest Alliance certification.

Organizational Capacity and Competency. Strong governance is the foundation of McCormick’s sustainability framework. Many of the company’s impacts related to people and the environment are managed at the operational level, while overall coordination and strategic direction is provided by its Purpose-led Performance Governance Council. This council is chaired by the Company’s Chief Administrative Officer, and is composed of senior executives with direct responsibility for a variety of functional areas, including human resources, environment, packaging, sourcing, corporate social responsibility, government affairs, communications, innovation, and investor relations. McCormick’s global sourcing team has a strategic focus on sustainability and resiliency across its supply chain to drive lasting farm community impact. Besides serving a financial function, the sourcing department also has oversight for quality of the crop, vendor relations, and undertaking regular audits.

Monitoring and Review. McCormick conducts, or has conducted on its behalf, audits of Suppliers, including those identified in Phase 1, to monitor compliance with its Supplier Code of Conduct. Among its suppliers, those that are deemed to be medium risk (based on commodity and country/region of origin) are required to enroll in the Supplier Ethical Data Exchange (SEDEX) program, whereas those that are deemed to be high risk (such as those sourcing black pepper from Vietnam or vendors from which McCormick sources large volumes) are required to undergo annually an independent audit against the SEDEX Members Ethical Trade Audit (SMETA) protocol. The scope of the SEDEX Members Ethical Trade Audit (SMETA, Version 6.1) encompasses topics related to labor standards, health & safety, environment and business practices. The scope of issues reviewed is consistent with the requirements of PS2 related to working conditions (including child labor) and occupational health and safety and touches upon environmental issues considered under PS3 related to energy and water usage. Among its Suppliers globally, McCormick has identified those with a potential highrisk profile and is taking steps to manage the risk, by enrolling them in SEDEX and requiring all vendors deemed highrisk to undertake a third-party SMETA audit of their facility. Non-compliances identified during SMETA audits are agreed to be resolved within a reasonable timeframe by the vendor as per a SMETA Corrective Action Report Plan (CARP). Since implementation in 2017, no critical non-compliances (for example, related to child labor) have been identified. To safeguard against future critical non-compliances, should they be identified, McCormick will work with vendors to ensure immediate remedial action and implement the correct processes.

McCormick has finalized applicable internal audit Key Performance Indicators (KPIs) to rate the overall sustainability performance of its suppliers against compliance to key sustainability criteria. Building on the findings related to traceability, adoption of sustainable farming practices, Rainforest Alliance certification, and the SMETA audit process, McCormick has developed its PLP’s Sustainability Matrix which encompasses three levels, (i) Grown for Good – G4G Communities (best in class, equivalent to RFA +); (ii) G4G (sustainable, equivalent to RFA, including third-party audited); and (iii) Engagement (in its way to sustainable, including complying by McCormick’ Supplier Code of Conduct). The three McCormick pepper suppliers in Vietnam have already achieved G4G rating for 50% volume in 2020 with a target of 100% by 2025.

McCormick’s latest Purpose-led Performance Progress Report was disclosed in January 2020 and updated in July 2020 and highlighted progress status on its PLP strategy and targets, reflecting the company’s work to improve the lives of people, communities where we live, work, and source, and the planet we share

McCormick expects its suppliers to comply with all applicable laws and regulations of the countries where they conduct business and to adhere to employment practices as stated its Global Supplier Code of Conduct related to: child labor; forced labor, slave labor, and human trafficking; working hours and wages; compensation; non-discrimination; and workplace conditions. This is considered largely aligned with the scope of IFC’s Performance Standard 2.

IFC’s risk screening on the supply chain suggests the presence of child and/or forced labor in the following countrycommodity combinations: vanilla from Madagascar and black pepper from Vietnam. McCormick strictly prohibits child labor and suppliers are required to adhere to the minimum employment legal age limit defined by national law or regulation and comply with relevant International Labor Organization (ILO) standards. Suppliers are prohibited from permitting children to perform work that exposes them to undue physical risks that can cause physical, mental or emotional harm or improperly interfere with their schooling (except in the context of apprenticeships for minors as legally allowed).

In line with McCormick’s commitments related to the California Transparency in Supply Chains Act of 2010 and the UK Modern Slavery Act of 2015, the company is focused on ensuring that its agricultural supply chain does not contain forced labor practices. McCormick is in the process of developing and implementing key performance indicators (KPIs) to measure effectiveness, concerning child labor and forced labor. Currently, the following measures are taken to ensure that McCormick supply chains are child and forced labor free: at the farmer level, McCormick is scaling-up its Grown for Good standard or equivalent benchmarked certification schemes, for which the absence of child/forced labor is a critical criterion. The certification requires third-party audit and verification of these criteria. At the Supplier (factory) level, SEDEX/SMETA audits are performed for those identified as higher risk, which provide third-party verification on the absence of child or forced labor. Additionally, as a member of the Sustainable Vanilla Initiative, McCormick was part of the “Supporting sustainable and child labor free vanilla-growing communities in Sava region, Madagascar” project (SAVABE), which aims to assess and prevent child or forced labor in the vanilla sector of Madagascar by addressing its causes as an industry.

Suppliers are required to prevent discrimination based on race, gender, ethnicity, nationality, or religion, and any form of physically or mentally abusive workplace practices. Employee medical tests, that can be used to discriminate in hiring or employment practices, are not be required. In addition, suppliers must recognize workers’ right to form of join trade unions, provide wages that support the purchase of basic necessities for an individual or family; and ensure that working hours are in line with legal mandates.

Vendors are required to provide employees with safe and healthy working conditions and at a minimum: potable drinking water, clean restrooms, adequate ventilation, fire exits, and essential safety equipment including training, an emergency aid kit, access to emergency medical care, and appropriately lit work stations. Facilities are required to be constructed and maintained in accordance with applicable law.

Although McCormick’s Supplier Expectations Manual does not currently include the need for Suppliers to have a grievance mechanism in place to address concerns from smallholder farmers, the SEDEX / SMETA protocol assesses if a grievance mechanism is in place for workers, communities, and suppliers or a published, anonymous and/or open channel for reporting grievances.

As part of its approach to responsible sourcing, McCormick fully recognizes the role women play on farms and is committed to empowering women across its supply chain by 2025. McCormick partnered with CARE International in 2018 to map women on-farms contributions across its five iconic supply chains. Such mapping includes a baseline study and need analysis, through a gender lens, for the communities from which McCormick is sourcing. To date, these reports have been completed for vanilla in Madagascar, black pepper in Vietnam, and red pepper in India. The recommendations coming from these studies will be incorporated into McCormick’s strategy to build resilience for farming communities and empower women in origin countries. In 2017, McCormick became a member of WEConnect International, a global network whose goal is to help international women-owned businesses develop and seek procurement opportunities around the world.

McCormick is committed to combating the effects of climate change across its operations by adhering to targets for the reduction of air emissions, energy consumption, waste, and water use. Through McCormick’s global Environmental Management System (EMS), the company identifies and manages environmental risks across company operations with a focus on continuous improvement. The EMS uses a global scoring system based on leading and lagging indicators to measure progress. The company is tracking progress by 2025 toward the following goals: reductions of 20% of Scope 1 and Scope 2 greenhouse gas emissions and water use, waste recycling and recovery rate of 80%, and reduction of 25% of the packaging carbon footprint.

McCormick expects its suppliers and vendors to conduct their business in a manner that is compatible with the environment and in accordance with applicable law. This includes taking steps to minimize solid waste by reducing, reusing, and recycling materials; encouraging conservation of resources and energy; providing training and education for its employees; and supporting efforts to establish and implement policies that also protect the environment. McCormick will purchase materials only from suppliers who continually meet the company’s specifications on manufacturing practices.

Energy Use and GHS Emissions. McCormick is focused on energy efficiency and reducing GHG emissions in its own operations, and expects agricultural suppliers to optimize their energy efficiency, increase their use of renewable energy sources, and understand their GHG emissions profile and options for reducing it through awareness raising and shifting production patterns. In its 2019 PLP report, McCormick set a new industry-leading goal to reduce its Scope 3 GHG emissions by 16% by 2030, which was validated by the Science Based Targets Initiative (SBTi).

Water Conservation. McCormick expects agricultural suppliers to continuously improve their water use efficiency and conservation through better management, and where applicable, to develop water management plans and investment in technologies to support responsible water use.

Soil Management. McCormick expects its agricultural producers to take steps to minimize soil loss and contamination, prevent negative impacts on water quality, and to maintain and improve the fertility of soil.

Management of Pesticides and Fertilizers. McCormick expects its agricultural suppliers to use all chemical products (for crop protection and nutrient support) in accordance with applicable laws and regulations and the guidance of product manufacturers, and to minimize the potential harmful impacts on water quality and air quality. McCormick prohibits the use of chemical products listed in Annex III of the Rotterdam Convention and substances banned under the Stockholm Convention on Persistent Organic Pollutants. In instances where such products are in use, the supplier is required to have a management plan in place for phasing these products out over time. Through the Rainforest Alliance certification process, farmers are trained on sustainable agriculture standards including application of integrated pest management principles (including how to use pesticides properly) as well as fertilizers. Farmer households are visited on a regular basis by field technicians for on-going training and to help resolve emerging issues. 

McCormick recognizes that the protection of biodiversity and conserving significant natural habitats is critically important to global terrestrial and aquatic ecosystems and to the company’s long-term business success. Where applicable, McCormick expects agricultural suppliers to avoid any actions that lead to deforestation or degradation of wildlife habitat and freshwater systems, and to respect protected and high conservation areas as identified in the Ramsar List (wetlands) and the IUCN Category I-IV areas. This applies to both ongoing operations and potential new production areas.

Implementation of the farm management system enables traceability back to the farm gate across the five branded iconic ingredients and the Rainforest Alliance certification (already 60% for red pepper, 24% for black pepper, and 34% for vanilla are sustainably sourced), with the expectation to reach 100% by 2025 for all 5 branded iconic ingredients).

This allows for identification of any sites that might potentially overlap with biodiversity areas, which would not be eligible for certification under the Rainforest Alliance standard. If such overlap would be identified, McCormick and its Suppliers would stop sourcing from such areas that are not compatible with Rainforest Alliance certification.

Currently, less than 50% of the volume of iconic ingredients procured is certified under the Rainforest Alliance standard but is expected to go up to 50% by the end of 2021. In combination with a private backward integration program and other projects implemented with donors and service providers, it is expected that the target of 100% will be reached by 2025 for the five iconic ingredients.

Broad Community Support is not applicable for this project.