While all Performance Standards are applicable to this investment, IFCs 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. If IFC's investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards.

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention

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

The environmental and social impacts which are expected to occur among VF’s suppliers are those related primarily to apparel manufacturing, and some denim washing/wet processing. The most significant of these impacts are related to safe and fair employment conditions, occupational health and safety, fire safety protection (including emergency response), emissions to air and water, hazardous materials management and use of energy and water.
The suppliers to be financed are all existing factories, =since no Greenfield factories will be financed and for this reason impacts related to PS5 (Land Acquisition and Involuntary Resettlement); PS6 (Biodiversity Conservation and Sustainable Natural Resource Management), PS7 (Indigenous Peoples), and PS8 (Cultural Heritage) are not expected. Suppliers impacts are limited mostly to its premises and impacts to local communities are not expected, therefore PS4 (Community Health, Safety and Security) is also not applicable.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs 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 the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.

Social and Environmental Management Program: As part of its Corporate Responsibility program, VF has a comprehensive and functional supplier compliance framework. VF has adopted its own Global Compliance Principles (GCP), which were first established in 1997 and have been periodically updated. The content of the GCP are further discussed in this document. Potential suppliers and vendors must meet the GCP requirements in order to do business with VF; the suppliers must also sign VF’s Terms of Engagement which include; (i) ethical standards; (ii) legal requirements; (iii) intellectual property rights; (iv) product labeling; (v) indemnification; and (vi) VF corporation global compliance principles.



IFC has reviewed VF’s supplier compliance framework and found that it is largely aligned with IFC’s Performance Standards. In particular, VF’s system has historically focused on labor issues, which are aligned with Performance Standard 2 (Labor and Working Conditions). The GCP have provisions consistent with internationally recognized labor standards covering issues regarding forced and child labor, discrimination and harassment, wages and benefits, and freedom of association; it also has requirements to offer a safe work environment to employees. The GCP’s latest updates incorporated environmental concerns.



The GCP 16 principles relate to the following: 1) Legal and Ethical Business Practices; 2) Child Labor; 3) Forced Labor; 4) Wages and Benefits; 5) Hours of Work; 6) Freedom of Association and Collective Bargaining; 7) Health and Safety; 8) Nondiscrimination; 9) Harassment; 10) Women's Rights; 11) Subcontracting; 12) Monitoring and Compliance; 13) Informed Workplace; 14) Worker Residence (Dormitory); 15) Facility Security; and 16) Environment. Full detail of the GCP is available at VF’s website: http://www.vfc.com/VF/corporation/resources/images/Content-Pages/Corporate-Responsibility/VFC-Global-Compliance-Principles.pdf



In order to become a VF Authorized Facility, suppliers need to agree with the Terms of Engagement and each location undergoes a thorough on-site audit process on a regular basis. VF has disclosed its audit procedures (available on the website is the VF’s Factory Audit Procedure http://www.vfc.com/VF/corporation/resources/images/Content-Pages/Corporate-Responsibility/VFC-Factory-Audit-Procedure.pdf ). The audit process also has evolved over time and in some cases third party audits are commissioned. In Bangladesh all compliance audits are performed by internal VF auditors.



VF has defined four ratings to evaluate and assess suppliers: Accepted; Accepted to be upgraded; Accepted to be upgraded – Pending Rejection; and Rejected. If a factory is rejected VF will not continue to use such a supplier. Suppliers in need of improvements agree to a Corrective Action Plan (CAP), with implementation thereof verified by the auditors. Suppliers rated as “Accepted” are factories with no material safety, health or labor issues, and these
factories undergo annual reviews. Suppliers rated as “Accepted to be upgraded” have some major safety, health or labor issues and a CAP has been agreed, VF requires the suppliers to address the identified issues in a timely manner and follow-up inspections are schedule within 6 months. Suppliers rated as “Accepted to be upgraded - Pending Rejection” have some persistent major safety, health or labor issues; these suppliers may be authorized to produce VF products, but must substantially remediate the identified issues within 3 months. ”Rejected” suppliers have persistent issues of non-compliance and are not authorized to produce VF products.



In 2011 VF published its second compliance report which details the procedures and results of the supplier compliance framework: http://www.vfc.com/VF/corporation/resources/images/Content-Pages/Global-Compliance/2011%20VF%20Compliance%20Report.pdf .

In addition to VF’s supplier compliance framework, in Bangladesh, VF is part of Alliance for Bangladesh Worker Safety (“Alliance”), an initiative launched by a group of North American apparel companies and retailers and brands who have joined together on a five-year initiative with the intent of improving safety in Bangladeshi factories. Under Alliance, suppliers must undergo a comprehensive Structural, Electrical and Fire Safety Assessment, which is accompanied by an Action Plan (AP) to be implemented by the suppliers. The suppliers to be financed by IFC under this project have undergone this assessment and the funds are intended to implement items in the AP. IFC reviewed the Alliance documents, including the Fire Safety and Structural Integrity Standard and the Alliance Assessment Protocols which were harmonized with the standards used by the National Tripartite Committee and the Accord on Fire and Building Safety in Bangladesh. Such Standards are aligned with Bangladeshi local law (e.g. 2006 Bangladesh National Building Code) and incorporate some minimal number of stronger requirements of international codes such as US-NFPA (USA - National Fire Protection Association) and ASTM (American Society for Testing and Materials), information on the standard development and content is available at Alliance website: http://www.bangladeshworkersafety.org



The Structural, Electrical and Fire safety Assessment is conducted by qualified, independent assessment firms, selected by the Alliance Committee of Experts. Each factory assessed has three reports (which can be combined into one) covering each component (Structural, Electrical and Fire Safety respectively) and one SE&Fs Action Plan. The reports and SE&Fs action plans of some of the audits already performed are available on the Alliance’s website. The assessment reports identify non-conformities that are prioritized using a system that rates their severity and identifies the priority level; the reports also outline the necessary corrective actions to be made. There are specific escalation protocols when factories
are believed to have Severe and Imminent Life Safety risk. VF as part of the Alliance follows its assessment protocols.



IFC reviewed a sample of the Structural, Electrical and Fire safety Assessment reports and SE&Fs Actions Plans from VF suppliers and found that the assessments were comprehensive and provide a well-defined set of actions to be implemented.



Once the corrective actions are implemented, a certified inspector confirms implementation aligned with the Alliance requirements. The implementation reports will be submitted to the Alliance members supplying from the audited factory. For Suppliers under this project, VF will follow up on the implementation of the Structural, Electrical and Fire Safety Action Plan (SE&Fs Action Plan) to ensure it has been implemented accordingly.



Organizational Capacity and Competency: VF has in place an effective social compliance team which ensures implementation of VF’s Terms of Engagement and the Global Compliance Principles (GCP). A core team of more than 35 full-time associates located in 12 different countries reports to a Director of Factory Compliance. During 2013 VF’s factory auditors conducted 2,052 factory inspections in 58 countries, as reported in the 2013 Compliance Report. In Bangladesh currently VF has a full time auditor and is in the process of recruiting a second. In addition the VF compliance system is supported by the local sourcing teams and regional offices.



All VF’s internal auditors are trained and certified to the standards of IRCA (International Register of Certificated Auditors). VF has in place internal trainings and control mechanisms to ensure good quality and consistency of audits. In addition, VF relies on some external auditors to cover all its suppliers; however, in Bangladesh compliance audits are performed by VF’s internal auditors. VF also set up training sessions for suppliers in critical areas; in 2010, 193 key suppliers were trained in different countries.



Regarding the Structural, Electrical and Fire safety Assessment, as mentioned previously in this report, Alliance has selected through a panel the qualified assessment firms with the technical capacity to perform such assessments. Suppliers under this project have been using those firms to perform the assessments.



Monitoring and Review: VF monitors supplier implementation of the compliance Corrective Action Plans though follow-up audits which are conducted according to the frequency determined by the rating achieved, which is related to the level of compliance. In 2005 and 2011 VF published compliance reports which provide details on the internal procedures and scope of the program. As mentioned earlier in this report, qualified firms will verify implementation of the agreed Structural, Electrical and Fire safety action plan for the Suppliers under this project.

Working Conditions and Management of Workforce Relationship: VF’s supplier compliance framework considers core elements of IFC’s Performance Standard 2 (Labor and Working Conditions). The Global Compliance Principles (GCP) have provisions on wages and benefits, requiring suppliers to comply at least with legally mandated minimum wages or the prevailing industry wage. In addition, the GCP require suppliers to provide legally mandated benefits and fully compensate for overtime according to local law. Provisions for hours of work require suppliers to adhere to local laws and to inform workers of overtime policies and to provide at least one day off in every seven day period.



VF Authorized Facilities, aligned with the GCP, should not discriminate nor tolerate any type of harassment and must ensure that women’s rights are protected (including maternity leave and policies regarding pregnancy). VF’s principles cover requirements to ensure Freedom of Association and Collective Bargaining without risk of harassment, intimidation or retaliation.



Other provisions covered by the GPC include requirements for worker dormitories, which should be clean, safe and healthy without imposing restrictions on movement; subcontracting is not authorized; and employees should be kept informed about workplace standards. Full details on specific requirements are available on VF’s website.

Protecting the Workforce: VF’s supplier compliance framework is consistent with internationally recognized labor standards. It covers issues regarding forced labor and child labor; which are regarded as serious violations during the supplier’s evaluation.

Occupational Health and Safety: Principle 7 of the GPCs, addresses specifically issues related with health and safety; indicating that the suppliers should provide their employees with a clean, safe and healthy work environment. A key element is the preventive approach of the principle. VF has systematically considered this topic as a priority and fully investigates significant events occurred in its suppliers’ premises.



As part of its commitment to workers’ health and safety, VF is a member of Alliance for Bangladesh Worker Safety. VF has commissioned (together with other companies) Structural, Electrical and Fire safety Assessment for all its suppliers in Bangladesh; and corrective actions has been agreed in a SE&Fs Action Plan, this project will support the implementation of such corrective actions.



Suppliers rated as “Accepted” or “Accepted to be upgraded” will qualify for IFC finance, before a supplier can be approved, IFC will review the supplier’s compliance audit reports (derived from VF audit) and the compliance Corrective Action Plan (CAP). IFC will confirm that there are no major or systemic non-compliances in terms of social and environmental performance, other than Structural, Electrical or Fire safety elements (which will be addressed with the finance). The supplier will implement the corrective actions
defined in the SE&Fs Action Plan from the Structural, Electrical and Fire safety Assessment; VF will provide to IFC periodically updates on the implementation of the corrective actions. VF will confirm full implementation using third party companies.



Non-Employee Workers and Supply Chain: VF’s GPCs clearly establish that suppliers should not sub-contract without previous authorization of VF and agreement of the Terns of Engagement. VF’s 2011 compliance report highlights the commitment to manage its supply chain. VF Corporation has a “Policy on Cotton Fiber Sourcing from Uzbekistan” which indicates the requirements to vendors and licensees to make their best efforts to trace their cotton sources and ensure that Uzbek cotton is not used in any VF product. VF is also part of apparel groups, including the Responsible Sourcing Network, which commit to not knowingly source Uzbek cotton for the manufacturing of any of our products; this is a public pledge that can be found in VF’s 2011 Compliance Report.

Principle 16 of VF’s GPC indicates the commitment of suppliers to environmental matters and the expectation of those facilities to make sustainable improvements in environmental performance. VF suppliers are required to comply with local environmental laws and regulations. In addition, policies and procedures should be in place to minimize impacts with respect to energy, air emissions, water, waste and hazardous materials. VF requires effluent monitoring for factories with significant discharges. Elements considered in VF’s compliance audits include storage and management of solid waste; pollution control devices for air emissions and compliance with environmental permits.



VF is committed to strengthening the capacity of the suppliers; in the past VF has provided training to suppliers including topics such as water treatment, and management of health and safety.

VF works with different external groups to enhance its compliance program, and to apply best practices within the apparel and footwear industry throughout its supply chain. VF works with the FLA, and AFFIRM, and is an active participant in the Fair Factories Clearing House (FFC) database. VF exchanges practices with these groups. VF indicates its commitment to engage and work with industry peers, working groups and Non-Governmental Organizations (NGOs) to foster and promote a healthier and safer work environment. VF, as mentioned before, publishes policies and reports on its compliance program through periodic Compliance Reports. VF plans to publish its first corporate Sustainability Report in 2014.

Alliance is committed to transparency in its operations and as part of this commitment, is making public the Structural, Electrical and Fire safety Assessment reports of the factories and corrective SE&Fs Action Plans, Alliance is also committed to present periodic updates of the initiative and its results in its website. At factory level, the results of the Structural, Electrical and Fire safety Assessments should be communicated to the workers.

This summary will be available at: VF office in Bangladesh and VF’s wecare.vfc.com website.


VF Bangladesh Office
Address : House # 10E, Road # 82, Gulshan - 2, Dhaka - 1212, Bangladesh.
IP Phone : (88-02) 9884860, 8853765

To contact the project company, or request additional information about the project please write to:

Scott Deitz
Vice President, Corporate Relations
VF Corporation
105 Corporate Center Blvd.
Greensboro, NC 27408
336.424.6000
Vfc.com

Broad Community Support is not applicable for this project

Current client performance is aligned with applicable Performance Standards and EHS Guideline requirements. No ESAP is required.