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.
Environmental and Social Policy and Supply Chain Management System and Program
Mabe's supply chain management system was formally created in 2010, following the system from General Electric (GE). The system is composed of three main areas, regulatory compliance, supplier responsibility guidelines (SRG), and conflict minerals. The supplier responsibility guidelines (SRG) program is designed to establish operating guidelines for suppliers located in developing countries. The program has 135 check points in areas of environment, industrial safety, human resources, safety, housing, conflict minerals, human resources, property safety, housing, conflict minerals, and environmental protection. In 2022 the company carried out the last update of the SRG checklist. From 2010 to 2021 the company has managed to reduce from 58% to 5% the number of suppliers in non-compliance status (red) and to increase the total number of suppliers with satisfactory compliance (green) from 37 % to 80 %. For conflict minerals (Gold, Tungsten, Tin, Tantalum) suppliers are annually requested to fill a survey to provide information about the source and tracing of the minerals.
Mabe contractually requires all its primary suppliers to meet its Supplier Responsibility Guidelines, which largely align with PS2 supply chain related requirements. The purpose of SRG is to build and continually strengthen an ethical, sustainable, and transparent global supply chain and establish clear social and environmental responsibility requirements for suppliers. First-tier suppliers are required to cascade requirements to sub-tier suppliers. Specifically, for PS2 risks, there are specific provisions for clear employment terms, prohibition of child labor and forced labor, recruitment, anti-discrimination, working hours, occupational health and safety, payment of minimum wage and overtime compensation, freedom of association, and grievance mechanisms. The requirements also include protection of the environment, and conflict mineral tracing (Gold, Tungsten, Tin, Tantalum).
Environmental and Social Risk Assessment. To operationalize the Supplier Responsibility Guidelines, Mabe has created a checklist (SRG Checklist) of criteria which suppliers are evaluated against. The criteria are used to evaluate suppliers as a self-assessment checklist and then used as an audit checklist that takes place based on the supplier's country of origin. Mabe has a list of countries of discretionary assessment, and a list of countries of mandatory assessment. The checklist has 135 checkpoints, out of which 60 of them are considered critical (red flags). Based on audit findings, suppliers are rated on a three-level scale. Green suppliers are those that fully meet the SRG audit criteria; yellow suppliers are those where at least one non-critical non-conformity is found. Red suppliers are those where at least one critical non-conformity was found, for example: lack of legal permits or indicators of child labor. Non-compliances identified through the audits, are addressed by the supplier through a time-bound corrective action plan (CAP) agreed between Mabe and the supplier, which will include prevention, mitigation and remediation actions, as appropriate. Mabe may decide to suspend the relationship with the Supplier until a CAP is agreed, or during the execution of the CAP. Mabe through its contractual agreements, reserves the right to terminate the commercial relationship in case supplier performance is not adequate. Mabe, as part of its continuous improvement efforts has agreed to update its SRG checklist to include protections against child labor including young workers between 16 and 17 years of age.
Supply Chain Organizational Structure and Competency
The Supplier Responsibility Guidelines (SRG) team is in charge of execution of the supplier management system. The SRG team belongs to Corporate Supplier Quality under the Operations VP. At the corporate level the Board of Directors has delegated the supervision of compliance with policies and other responsibilities of audit to an Audit Committee. This committee has official meetings quarterly; can hold meetings of work every month and has four main members. The responsibilities of this committee, among others are the evaluation of the continuity of the business and the approval of the Annual audits and results quarterly. This committee also supervises the activities of the area of Internal.
For management of risk the board of directors has delegated risk management to the Risk Committee. This committee meets twice a year and is made up of five members, three of them selected by the group of Mexican shareholders and two appointed by GE Appliances. This committee that has among its main responsibilities, evaluate and control the different risks to which the company is subject to.
Supply Chain Monitoring, Reporting and Supplier Training
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As part of the supply chain management program and monitoring of suppliers, Mabe has implemented an annual audit program. Suppliers are audited at least every 3 years when no non-compliances have been found in the previous audit; every 2 years when there were minor non-conformities found (yellow); and every year for non-compliant suppliers (red). Under the GTSF financing, only suppliers in yellow and green will be financed.
Mabe's SRG team offers training on the details of the audit program to suppliers during on-boarding, and annual trainings for current suppliers as needed.
