All retail sites are leased and located in urban areas.  Khaadi owns one office space that was used as the company headquarters and is currently vacant; this was acquired through a market transaction in 2000. The retail stores are located on commercially demarcated land in developed urbanized/metropolitan areas, in modified habitats, and it is therefore unlikely that issues related to biodiversity conservation, indigenous peoples or cultural heritage will arise.

Hence the types of risks envisaged in PS5 (Land Acquisition and Involuntary Settlement), PS6 (Biodiversity Conservation and Sustainable Management of Living Natural Resources), PS7 (Indigenous Peoples) or PS8 (Cultural Heritage) are not applicable. Going forward, prior to any significant expansion, especially those requiring land acquisition, the company will conduct site screening to ensure that risks and impacts, if any, are adequately identified and managed in a manner compliant with IFC’s Performance Standards 1 to 8.

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 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 that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines and adequately managed through the implementation of expansion work specific Environmental and Social Management Plan.

Key E&S risks and issues related to this project include: (a) the company’s capacity and systems to manage its social, environmental, health and safety (EHS) aspects of its operations (stores, primary suppliers) in compliance with legal requirements as well as IFC’s Performance Standards and World Bank Group (WBG) EHS guidelines; (b) life and fire safety (LFS) management for all stores as per WBG EHS Guidelines; (c) assurance of fair, safe and healthy working conditions for its workforce (both company employees and third party workers) including management of occupational health and safety, and COVID-19 response measures; (d) resource efficiency; management of wastes; and (e) E&S risks in the supply chain. 

Identification of E&S Risks and Impacts

Khaadi’s retailing stores are either within established commercial shopping malls, or standalone outlets in tier 1 or 2 cities, with limited environmental impacts. No environmental impact assessment (EIA) is required for establishment of Khaadi’s retail facilities. Khaadi obtains permits as per the local permitting process for the operations which include requirements to obtain relevant trade licenses, a valid lease, labor law registration and Certificate from the fire department before starting the business.

Selection of sites (for establishment of retail outlets) is based on a result of alternative site analysis including market conditions, accessibility, and availability of infrastructure (water supply, wastewater discharge, electricity). Khaadi selects malls that have a high-quality focus and are well established with the workmanship of construction and associated structures inspected and approved by host relevant governmental authorities. For sites that are not located in malls, Khaadi selects commercial space that meet the selection criteria mentioned above or sites suitable for constructing their own outlets. Outlets are subject to structure/safety evaluations by a professional team commissioned by the company. 

As part of the new site selection process, the company will develop and implement a procedure upon which to screen for potential environmental and social risks and hazards and develop a mitigation plan to respond to the identified risks / hazards as a part of the ESMS development; this is further described below. 

Khaadi only has one warehouse for thei own use and has no expansion plans for this. This is different from warehouses that are for public commercial use in that there are no specific permits /licenses required. Khaadi has installed fire hydrants, smoke detectors, sprinkler system and fire extinguishers at the warehouse in compliance with local regulations. 

Environmental and Social Assessment and Management System, Policy and Management Programs

The current approach to managing E&S issues is focused on meeting the statutory requirements of various regulatory agencies such as the municipal council, the environment agency, fire department and labor department. Khaadi does not have a formal corporate management system documents (E&S policies and procedures) for managing environmental and social performance. Store/outlet managers are responsible for developing, implementing and monitoring the performance of each store/outlet, including E&S related issues, hiring staff and evaluating performance (including safety and HR management).

As agreed ESAP #1, Khaadi will adopt IFC’s Performance Standards as part of their applicable requirements. In doing so, Khaadi will develop and implement an Environmental and Social Management System (ESMS) at the corporate level to provide consistent oversight of environmental, health, safety and social aspects for all operations and implement this across all business lines.  The ESMS will include: i) a corporate E&S policy; ii) overarching HSE policies and procedures; iii) establishment of a corporate level E&S unit headed by a qualified senior manager; and iv) a process to ensure relevant aspects of the ESMS are communicated across the retail business and operations. These E&S policies and procedures will be approved and endorsed by senior company management. 

As part of ESMS and per ESAP#2,  the company will develop and implement Environmental, Health, Safety and Social (EHS&S) management plans and procedures in compliance with national regulations and the Performance Standards including that related to: a) identification of risks and hazards associated with operations as applicable via risk screening; b) occupational health and safety management; c) life and fire safety including emergency response and preparedness; d) waste and hazardous materials (such as pesticides, fuel for generators, etc.) management; e) energy management; f) inspections, trainings and drills; g) monitoring and reporting; h) stakeholder engagement and grievances; and j) oversight of primary suppliers. The EHS&S management plans / procedures will also define key E&S performance Indicators (KPIs) and mitigation and performance improvement measures and actions associated with the identified E&S risks and impacts during both construction of new retail outlets, as well as during retailing operations, including oversight of primary suppliers.

Organization Capacity and Competency

The different business divisions are headed by divisional heads.  The respective store manager and his/her team are responsible for the day-to-day business, including the E&S management at the store/outlets.

As per ESAP #1, as a part of the ESMS establishment, the company will formally establish an E&S unit headed by a qualified manager at the corporate level with qualified environmental, social, health and safety professionals as applicable to support development, implementation and monitoring facility (retail outlets. warehouse, primary suppliers etc.) level EHS&S management plans, conducting monitoring, leading EHS audit activities, planning and conducting trainings, preparation of reports for corporate level reporting and ensuring ongoing compliance with the Performance Standards and associated EHS Guidelines. The EHS unit will be responsible for ensuring Khaadi is in compliance with relevant policies and procedures, IFC and regulatory requirements and to ensure consistency with good international industry practice (GIIP) across all businesses. The E&S unit manager will be designated with responsibility for the development of the ESMS and ensure there is a program of continuous improvement that includes training, monitoring the performance across all the business verticals of Khaadi and reporting to the management and, equally, communicating E&S aspects to external interested parties relating to the company operations as may be required. The manager will coordinate with various business verticals to ensure compliance with E&S requirements including the Performance Standards and monitor implementation of the overall ESMS.

Emergency Preparedness and Response

Khaadi’s emergency response measures include installation of firefighting equipment at retail outlets and the warehouse, including designated fire marshals at all operations. The company plans to conduct fire and emergency drills from 2022 and, as per ESAP#2, develop and implement a facility (retail/warehouse/office) specific Emergency Preparedness and Response Plan (EPRP) for implementation by the respective facility manager at all the retail outlets, stores, warehouse and offices for potential emergencies relating to natural disasters, fire, medical, physical aggression, civil unrest, terrorism; the plan will also include a schedule for emergency and fire drills.

HSE training and drills were previously planned by the company, however implementation at the head office has been disrupted due to COVID-19. For the retail network, HSE training is being conducted in all the regions. Scope of trainings include understanding fire risks, roles and responsibilities, fire prevention tips, NFPA Classification, fire alarms and detection equipment, fire extinguishing equipment and types, safety signages, use of fire extinguishers and emergency drills.

COVID-19 Measures

Khaadi follows the relevant WHO procedures to manage issues related to the pandemic including social distancing, use of hand sanitizer, requirement of wearing face masks, etc. During the initial months of the pandemic, office workers were working from home, while from March to end of April 2020 stores were also closed. Stores reopened as per Government regulations in May 2020, with reduced operating hours. Stores have installed social distance markings placed on the floor areas, while face masks are mandatory for every visitor. Visitors are checked with digital thermometer upon entry and there are restrictions on the number of customers allowed in at any one time which varies based on store size. Khaadi has also closed all fitting rooms across Pakistan to minimize risk of contamination and transmission in enclosed spaces.

Monitoring and Review

Khaadi’s corporate office compiles the information related to HR, operational aspects, incidents, and commercial aspects such as stocks and sales. In order to extend this monitoring program to cover E&S aspects and benchmark the performance of various retail outlets, internally as well as against the good international industry practice (GIIP), as per ESAP #2, Khaadi will develop a Standard Operating Procedure (SOP) for monitoring and reporting of key performance indicators (KPI) across all the stores. The summary reports from this exercise shall be submitted to top management on a periodic basis.                                                   

 The company and its subsidiaries employ a total of around 1,100 employees. Women represent 26% of the total workforce in Pakistan and 75% of the workforce outside of Pakistan. There are 247 employees working at Khaadi’s headquarters of which 44% are female. There are 763 employees in retailing stores in Pakistan and 90 outside of Pakistan.  There are 35 employees engaged by third parties in Pakistan that have transactional / clerical roles such as executive assistants, record keepers, security personnel, etc.

Human Resource Policies and Procedures

Khaadi follows the legal requirements in managing HR.  Employment contracts are provided and signed at the time of employment. All legally required benefits to employees have been recognized and implemented, including paid leave and social security (through the Employees' Old-Age Benefits Institution (EOBI).

Khaadi is in the process of developing a formal corporate HR policy and procedure to managing its workforce relationship, promotion, job specification, salary scale. HR documentation drafted include a Code of Conduct, grievance mechanism, anti-harassment and anti-discrimination policies, hiring process, talent acquisition policy and employee handbook.

The Code of Conduct consists of measures to foster a culture of ethics, honesty and professionalism in the company. It addresses confidentiality of business, sharing correct information with relevant stakeholders, maintaining office decorum, anti-bribery/corruption, usage of company's resources, etc. It includes a 'Whistle Blowing provision to facilitate employees to raise concerns against act of violations of the Code of Conduct.  The Code also includes a 'Zero-Tolerance' policy against harassment on the basis of race, gender, religion. and the Anti-Harassment and Discrimination Policy has been drafted to comply with the Pakistan” Protection against Harassment of Women at the Workplace Act, 2010”.

The establishment of a worker’s union is at the choice of workers and while there is no worker union associated with Khaadi’s operation, the company does not restrict workers from joining unions.  

As agreed ESAP#3, Khaadi will finalize the HR policy and procedures to ensure alignment with the respective host country requirements and those of this Performance Standard. In doing so, Khaadi’s HR policy will also include a specific policy on freedom of association, a grievance mechanism with no reprisal policy and anti-Gender Base Violence (GBV) at workplace. In addition, the company will provide training to supervisors and managers, and communicate all the HR policies and procedures to employees; the requirement to communicate the latter will also be defined in the employee handbook itself.

Working Conditions and Terms of Employment

The company has standardized employment conditions which are included in the written contracts of employment for each employee. Contracts for retail and third party staff are renewed annually. The working conditions, terms of employment and benefits provided including, wages, leaves, insurances, bonuses are defined in the contracts. Attendance is recorded as a basis for salary payment. Khaadi offers competitive salary with a performance bonus; this is based on an industry analysis. 

During the initial months of the pandemic, office workers were working from home, while from March to end of April 2020 stores were also closed. Stores reopened as per Government regulations in May 2020, with reduced operating hours, but no deduction of monthly staff salaries was made.

Stores are operating on average for 10 hours (reduced from 12 hours) a day, 5-6 days a week.  There are two shifts overlapping for 9 hours (with one-hour lunch break) whereby one shift arrives in the morning two hours earlier than the second shift which leaves two hours later in the evening. Store employees take turns for a weekly rest day and extra working hours or working on holidays are duly compensated for. The salary is based on 9-10 working hours during regular business under the normal circumstance.  As per ESAP#3, in finalizing the HR policies and procedures a legal review will be undertaken to ensure Khaadi’s terms of contract are consistent with all relevant host country laws and regulations.

Retrenchment

The number of workers is expected to increase along with the number of additional stores to be operational. Although there is currently no planned retrenchment, closure of stores due to poor business performance does occur which results in retrenchment or employment contracts are not renewed. There were 212 staff who left the company in FY2020 largely due to the impact of COVID-19 on retail business.  When retrenchment occurs severance packages are provided to workers whose employment contract is terminated early.  Where employees resign voluntarily, they are not entitled to a severance package. As per ESAP #3, a retrenchment procedure aligned with IFC’s Performance Standard 2 requirements will be developed and implemented to manage retrenchment in the future. This will include notification, consultation, contract determination process, eligibility of severance/separation package and a grievance mechanism for disputes handling.

Grievance Mechanism

A grievance handling procedure is available to all employees whereby all grievances are forwarded to the HR Department in writing.

As per ESAP #3, the company will update the current grievance handling procedure to a grievance mechanism by making provision for multiple complaints collection methods (telephone, email, grievance boxes, etc.), and allowing for anonymous complaints and complaints to be received orally. The procedure will also be communicated and accessible to the employees and third-party employees who currently do not have access to a grievance mechanism.

Prevention of Child Labor and Forced Labor

The HR policy specifically prohibits hiring of anyone below 18 years of age for all roles. Proof of age for employees is collected and maintained on file to prevent against use of child labor. 

While the company does not use any forms of forced labor, a policy statement will be developed to formalize this commitment. 

Occupational Health and Safety (OHS)

Considering the type of operations including that related to the warehouse, OHS risks (except fire safety, already covered above) are considered limited. The company provides first-aid boxes at the warehouse and the retail stores and the associated security teams are trained in first aid. Staff at the warehouse are also trained to handle the heavy products. Hard hats, safety shoes, protective gloves and florescent jackets are mandatory personal protective equipment for all warehouse workers.

Construction Safety

The construction of new retail outlets is normally outsourced to a contractor. Khaadi has specific requirements on OHS, environmental, labor and security requirements defined in the contract with the contractor.  The clauses referenced will continue to be used in managing construction contractors.

As per ESAP #4, Khaadi will develop a contractor oversight management plan for construction projects in line with IFC’s PS-2 requirements and aligned with GIIP safety practices and that for living conditions of construction workers ref: Workers’ Accommodation: Processes and Standards: A guidance note by IFC and the EBRD.

Supply Chain

The supply chain for the retailing stores/outlets can be divided into the following categories – (a) fabric / unstitched cloth; (b) ready to wear; (c) accessories. The risk of child labor, forced labor or significant safety risks/hazards in the supply chain are considered limited as suppliers are carefully selected and are from well established companies/brands.

There is no contract or contract framework with garment or fabric suppliers. Due diligence of suppliers is conducted by Khaadi’s Supply Chain Division based on a supplier’s past performance, existing clientele, capacity and equipment for quality products. A supplier’s certificate or audit results as conducted by international buyers are also reviewed during the selection process. There are a total of about 50 suppliers in Khaadi’s profile. Primary suppliers change from year to year, with a total of 7-8 in any given year. Four new suppliers became primary suppliers in FY’21 and 22.

The company’s Supply Chain Division consists of Sourcing, Logistics and Quality Assurance units. The division ensures that all Khaadi products reach stores on time, and as per the seasonal requirements set by the Product Team. Routine visits to suppliers are carried out by Khaadi’s sourcing team.

Although there is no formal audit program to oversee compliance on labor-related matters in relation to suppliers, certain Government departments monitor compliance of manufacturing establishments operating in Pakistan.  These departments include the Labour Department to ensure labour related compliance in relation to issues such as working hours, salary payments, overtime payments and occupational health and safety, EOBI for pensions and the provincial Employees’ Social Security Institution (Sindh ESSI/Punjab ESSI) for social security registration, among other.  

As agreed in ESAP#5, Khaadi will engage competent international labor experts to conduct a labor assessment of its primary suppliers. The result of the assessment will be used in the development and implementation of a primary supplier oversight management plan which consists of E&S criteria for supplier selection, corrective procedures, regular compliance monitoring against KPIs and reporting, and an approach to addressing outstanding issues and resolution thereof.                                                

 Water and Energy Supply and efficiency

Treated water is sourced from municipal supplies for all the stores. Electricity is the primary source of energy for all stores, which is sourced from the national grid. Some stores have small capacity diesel-fired backup generators. The main use of energy is lighting and air conditioning for office and retail stores. The company ensures that standard environmental control and resource efficiency measures are introduced in retail store design including the use of efficient cooling and heating system and energy efficient lighting.  In the recently completed head office, LED lights have been installed to save energy and reduce the heat impacts. The office has also been designed to use natural day light in high energy consumption areas. The company also plans to acquire green buildings certification for the headquarter building. 

Retail outlets located in large malls have centralized cooling system using water-based chillers. The isolated retail stores are installed with inverter technology based split air-conditioning units. The manufacturers of air-conditioning units in Pakistan can import only eco-friendly refrigerants under the Ozone Depleting Substance (ODS) Government policy. Logistics is subcontracted, and diesel is the fuel used in the transport vehicles.

GHG Emissions: GHG emissions for the Khaadi facilities are mostly due to electricity consumption and fuel consumption for backup generators and company owned vehicles. Based on electricity consumption estimates, emissions will be below 25,000 tonnes of CO2-equivalent annually, therefore GHG reporting requirements does not apply to this project.

Emissions and Waste Management

Wastewater from the stores is discharged into the municipal sewerage system and then further treated. Solid waste from the stores and head office (primarily domestic waste) is collected by the municipality for disposal at licensed landfills.  Paper, cardboard and waste packaging materials are recycled through third party vendors. Electronic items and e-waste are disposed of for recycling. Construction waste is disposed as per the local guidelines. Emissions will be primarily from backup diesel generators installed at the warehouse and standalone outlets. The company does not monitor emissions from these generators. The company does not store any hazardous materials at its facilities other than the cleaning agents used in housekeeping. Pest management at the warehouse and stores is outsources to third party vendors. As agreed under ESAP#2, a hazardous materials and waste management plan will be developed as part of EHS&S management plans focusing on segregation practice at the individual facility level to ensure maximum recycling of waste items and safe handling of hazardous materials.  

 Khaadi’s retail stores are all leased premises within existing buildings located in mixed use (commercial and residential) neighborhoods. Transportation of merchandise to the Khaadi’s warehouse is all arranged by suppliers through their own vehicles or provided by qualified third parties. For transportation of merchandise from warehouse to stores Khaadi uses mainly 2 logistic companies i.e., DEX (within Pakistan) and DHL (international)) with professional truck drivers adequately trained. Road incidents are monitored by Khaadi through its delivery system and are low in number and not considered significant.

All Khaadi’s retail stores (standalone and located in malls) are equipped with smoke detectors, alarm system and fire extinguishers to meet the local regulatory requirements. Fire extinguishers are checked and refilled annually by third party professional vendors. Additionally, outlets located in malls have installed sprinkler systems linked with the mall’s overall fire detection and suppression systems which include fire hydrants. Installation of the sprinkler systems is undertaken by professional vendors. Mall management and the associated vendor carry out final checks of the installed life and fire safety (LFS) system before store commissioning. Khaadi’s warehouse is equipped with fire hydrants, sprinklers, smoke detectors, and fire extinguishers. Each retail outlet has designated Fire Marshals (3 certified Marshals for a store with 15 staff and 2 Marshals at stores with staff less than 15), trained and certified from by professional institutes, who provide monthly safety training to the staff. Two fire safety trainings were conducted in 2019 by certified firefighting instructors to train about 50 Sales Advisors who are the main point of contact in stores and responsible for dealing with the customers.

To ensure compliance with Pakistan regulations and IFC’s requirements regarding LFS design and installation Khaadi will commission a suitably qualified consultant to develop a standard LFS master plan to be applied to the construction and renovation of all new retail stores and which also defines the approach to emergency planning and response. The plan will stipulate the local legal requirements, all applicable LFS codes and features to be applied inclusive of that related to means of evacuation and systems for fire prevention, detection and suppression, compartmentation, means of egress, amongst other requirements as necessary.  In compilation thereof, the company will ensure that the standards to be applied and as defined in the master plan align with the requirements of the LFS Section 3.3 of the World Bank Group General Environmental Health and Safety Guidelines.  This requirement is defined in ESAP#6.

Additionally, as part of ESAP# 7, within 4 months of finalizing the LFS master plan, the company will commission a suitably qualified specialist to undertake an audit of the 4 most recent retail stores opened in Pakistan to confirm these have been constructed as per the agreed LFS master plan.  The specialist will also conduct a review of 3 existing standalone stores to confirm compliance of agreed LFS master plan and define corrective actions where applicable. In addition, based on the findings the company and IFC will agree on the need to consider extending the review to additional stores. 

The company also plan to engage with local firefighting and safety agencies in Pakistan (such as Rescue 1122 and Pakistan Civil Defense Departments) to confirm local requirements in regard to LFS and ensure all the required ire permits have been obtained for existing and new stores.    Thus, as per ESAP #8, Khaadi will develop and implement a plan to obtain the respective fire permits from the local fire authorities for all stores and the warehouse.

The company engages professional security companies to provide security personnel/guards at Khaadi’s facilities in Pakistan; some of the guards are also armed. Khaadi ensures that the hired security company is registered with APSAA (All Pakistan Security Agencies Association) and is a license holder from Government of Pakistan. APSAA has an established training center to train guards on use of arms and rules of engagement in case of emergency. All Khaadi’s international stores are located within malls (except one at Jumeriah), and are covered and supported by the mall’s overall security management service. Stores in UK also have Redcare intruder alarms which are monitored by Secom and JM security companies.