44341 - Brandix Apparel Limited

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Environmental & Social Review Summary

Project Number

44341

Company Name

BRANDIX LANKA LTD

Date ESRS Disclosed

Feb 18, 2021

Country

Sri Lanka

Region

South Asia

Last Updated Date

May 5, 2024

Environmental Category

B - Limited

Status

Active

Previous Events

Approved : Jun 28, 2021
Signed : Aug 20, 2021
Invested : Nov 9, 2021

Sector

Garment and Apparel (With Primary Textile Operations, Excluding Footwear)

Industry

Manufacturing

Department

Regional Industry - MAS Asia & Pac

Project Description

Brandix Lanka Limited (“Brandix Group”, the “sponsor” or the “Group”) is one of the leading apparel manufacturers with operations in Sri Lanka, India, Bangladesh, Haiti and Cambodia and employing over 60,400 workers. It began operations in 1972 and the global footprint includes 28 manufacturing facilities (21 in Sri Lanka, 4 in India and one facility each in Bangladesh, Cambodia and Haiti).

Brandix Apparel Limited (“Brandix” or the “company”) is a 100% subsidiary of Brandix Lanka Limited covering the Sri Lankan operations (i.e. 21 manufacturing facilities). The company manufactures Activewear, Casualwear, Intimate wear and Sleep & Loungewear for customers such as Uniqlo, Calvin Klein, Marks & Spencer, Victoria’s Secret and PVH among others. With the exception of one wet processing facility involving dyeing and washing using hazardous chemicals, all facilities operated by Brandix in Sri Lanka only involve cut and sew operations.

The proposed IFC investment is a senior long-term loan for up to US$ 50 million to Brandix to finance the medium and long-term term working capital requirements and the growth and maintenance of capital expenditure in Sri Lanka (the “Project”). The proceeds from the proposed investment will be used exclusively for the company’s Sri Lankan operations.

Overview of IFC's Scope of Review

IFC’s environmental and social (E&S) due diligence, considering the COVID-19 related travel and lockdown restrictions, comprised of: 1) review of E&S related documents and information shared by the company; 2) virtual appraisal meetings held via video conferencing between 7th and 15th December 2020 with the company's corporate and divisional level senior management staff from: health, safety and environment (HSE); human resources (HR); gender; community engagement; and strategic sustainability teams; and 3) virtual walkthrough of one sample facility in Sri Lanka and review of photographs and videos shared by the company of different facilities to get an overview of the implementation of HSE aspects.
Recognizing the limitation of virtual appraisal due to COVID related travel restrictions, IFC commissioned third party labor assessment at three sample facilities to review the labor practices and assess compliance with the requirements of Srilankan labour laws and IFC Performance Standard (PS) 2. The disclosure document has been updated to include the recommendations for improvement in the form of a corrective action plan developed in Feb 2022 as an outcome of the labor assessment.

E & S Project Categorization and Applicable Standard

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

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
PS 4 - Community Health, Safety and Security

PS5: Land Acquisition and Involuntary Resettlement is not applicable since all facilities are existing and located on land that has been acquired commercially through 'willing buyer-willing seller' arrangements. There is no proposal to establish any new manufacturing facility either through brownfield acquisition of existing facilities or development of new greenfield facility under the project. There are no ecologically sensitive areas nor indigenous people or cultural heritage in the vicinity of the project and PS6: Biodiversity Conservation and Natural Resources Management, PS7: Indigenous Peoples and PS8: Cultural Heritage are not applicable.

This is a Category B project as per IFC’s Policy on Environmental and Social Sustainability. Key E&S risks and issues associated with this project include: company’s capacity and systems to assess and manage E&S risks and impacts; assurance of fair, safe and healthy working conditions including systems to address gender based violence and harassment (GBVH) risks in compliance with local regulatory and PS2 requirements; potential for short term labor retrenchment due to COVID-19 crisis; occupational health and safety; resource efficiency; management of wastes and emissions, greenhouse gases (GHG) emissions, emergency preparedness and response, including life and fire safety management systems; and community health, safety and security issues.

Stakeholder Engagement

Aligned with its Sustainability strategy, the Group delivers its approach to Corporate Social Responsibility (CSR) through a robust community engagement programme. The CSR strategy reflects the company’s explicit commitment to focus on improving the quality of life for its employees as well as for the communities located around its facilities. The efforts are framed by four key pillars: Provide, Educate, Research and Engage. Through a survey conducted internally, it was assessed that clean and safe water access was an issue faced by 85% of the company’s Associates, of which nearly 90% were women. As such, the primary focus of the CSR agenda for Sri Lanka has been on providing safe access to water and sanitation and overall health which supports evidence-based, gender-based violence risk reduction.

The company developed ‘Care for Our Own’ (CFOO) and ‘Model Village’ initiatives to address water and sanitation issues. CFOO is the flagship initiative by Brandix to improve access to clean water and since its launch in 2006, more than 4,500 beneficiaries (primarily company employees) across 300 communities have benefitted. In 2019/20, the company completed 205 projects, which have helped enhance the quality of life for an additional 1,100 people across Sri Lanka. The ‘Model Village’ project is yet another effort by the Group to strengthen water and sanitation infrastructure at community level. Originally implemented across important institutions, such as schools, hospitals, police stations, community centres and religious places within a 5 km radius of its factories, the radius has since been extended to 10 km following the success of this initiative.

Under the Educate pillar, the ‘Ran Daru Thilina’ initiative targets children of Brandix Associates from nursery age to Grade 5, with each child receiving a pack comprising essential school items for his/her academic year. Since launching in 2006, nearly 36,000 children have benefitted to date.

The Brandix Group supports the implementation of the 17 Sustainable Development Goals (SDGs) that were adopted by the 193 United Nations Member States in September 2015. The company has opted to support the SDGs through a focused approach for specific initiatives in areas to which it believes it can meaningfully contribute. The company has been disclosing its Sustainability Report since 2012 and the 5th Sustainability Report covering the apparel manufacturing operations in Sri Lanka, India and Bangladesh for the period 1st April 2019 to 31st March 2020 is available at https://brandix.com/images/brandix-sustainabilty-report-2019-20.pdf on the company’s website. The report also serves as the Communication of Progress (COP) under the Ten Principles of the United Nations Global Compact (UNGC), across the areas of Human Rights, Labour, the Environment and Anti-Corruption.

To further strengthen and formalize its stakeholder engagement, as per ESAP#1, the company shall formulate a documented community grievance mechanism in line with PS 1 requirements for addressing community grievances arising out of the company’s industrial operations and local community development projects (CSR). Community concerns and grievances about the company’s E&S performance including gender-based violence & harassment aspects shall be resolved using such mechanism.

Broad Community Support

Environmental & Social Action Plan

Title	Description	Anticipated Completion Date	Status	Comments	Completion Date
Formulation of a community grievance mechanism	Brandix shall formulate and implement a documented community grievance mechanism in line with PS 1 requirements for addressing community grievances arising out of company’s industrial operations and local community development projects (CSR). Community concerns and grievances about the company’s E&S performance including gender-based violence & harassment aspects shall be resolved using such mechanism.	30-Jun-2021

**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).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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Environmental & Social Review Summary

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Broad Community Support

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