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.
PS1: Assessment and Management of Environmental and Social Risks and Impacts
ABFRL and TCNS have established an ESMS that is appropriate to the nature and scale of the project and commensurate with the level of its environmental and social risks and impacts. Both ABFRL (https://www.abfrl.com/corporate-governance/policies/) and TCNS have promulgated and published multiple (https://wforwoman.com/content/report/sustainability) E&S relevant policies on their respective websites. These policies have provisions and commitments aligned to IFC PS requirements. ABFRL's ESMS is assessed to be generally aligned with IFC PS requirements.
Identification of risks and impacts: ABFRL has adopted regulatory compliance approach to manage E&S risks and impacts in its operations by straightforward application of regulatory requirements relating to building permissions, life and fire safety infrastructure and related clearances, shops & establishment, labor regulations, local municipal regulations, waste management, pollution standards, hazardous material management, resource conservation, design criteria, and construction standards. Legal compliances at ABFRL are managed digitally through a dedicated retail compliance portal.
ABFRLs environmental policy provides for undertaking environmental due diligence of merger and acquisition deals such as the current project. Upon completion of TCNS acquisition, as part of Environmental and Social Action Plan (ESAP)#1, ABFRL will undertake an independent environmental and social due diligence (ESDD) of the target company (TCNS) operations based on terms of reference agreed with IFC. The ESDD will be undertaken based on onsite audit and worker consultations at selected sample TCNS facilities including TCNS and franchisee operated exclusive business outlet (EBO) stores, warehouses, supply chain facilities (such as raw material suppliers, job work artisanal groups, and 3rd party manufacturing units), against applicable legal regulations and IFC PS requirements. The ESDD will formulate corrective action measures in the form of a time bound corrective action plan (CAP) to address the gaps, if any. ABFRL will implement the CAP and verify the implementation of the CAP till all items are satisfactorily closed. Based on the CAP, ESAP of this project might be updated, if required.
Management Programs: ABFRL has formulated and implemented appropriate E&S management programs and its ESMS has addressed the identified environmental and social risks and impacts, which include, among others, labor and working conditions, emergency response including life and fire safety infrastructure, resource efficiency, GHG emissions, waste management, and supply chain management.
E&S Organization: In line with AB Group policies, ABFRL has established and maintains dedicated organizational structure starting from Board level to various business division level (manufacturing and retail business divisions) with E&S related roles and responsibilities assigned. ABFRL has established Sustainability Department at Corporate level to manage occupational health and safety; supply chain; and corporate social responsibility (CSR) programs. Below the Corporate, at the business division levels, there are Business Safety Heads assigned to manage environment, health, and safety aspects in their respective business divisions (such as manufacturing, retail stores, warehouse). bs.As discussed above under ESAP#1 and as part of ESDD scope, ABFRL will evaluate TCNS ESMS elements and E&S organization specifically in the TCNS owned EBOs, warehouses and office buildings against IFC PS 1 requirements and implement a time bound CAP in agreement with IFC.
Emergency Preparedness & Response: ABFRL has established and maintains an emergency preparedness and response system in the form of a documented on-site emergency plan for its manufacturing and warehouse division operations. In retail stores that are company owned, life and fire safety infrastructure and management systems are established, maintained, and managed as per local fire permit conditions, Indian National Building Code (NBC), AB Group Technical Standards and specific US National Fire Protection Association (NFPA) requirements. All the retail store management staff are trained and certified on life & fire safety and other emergency response procedures through ABFRL Learning Management Systems (LMS) portal. Fire and emergency mock drills are organized at all ABFRL locations including retail stores involving all the staff and workers including customers in specific instances. A team of staff are identified as Emergency Response Team (ERT) in each of the ABFRL facilities and trained on a range of topics including evacuation techniques, basic first aid and firefighting. As part of ESAP#1, ABFRL will evaluate the life and fire safety risks in TCNS operations specifically in the TCNS owned EBOs, warehouses and office buildings and implement a time bound CAP in agreement with IFC.
Monitoring and Review: ABFRL has established systems and procedures to monitor and measure the effectiveness of the management program, as well as compliance with E&S related legal and/or contractual obligations and regulatory requirements. Senior management receive periodic performance reviews of the effectiveness of various sustainability programs, based on systematic data collection and analysis and is presented in the form of a Sustainability Dashboard. The Sustainability dashboard provides performance data covering aspects such as energy, water, climate strategy, green building, circular economy, safety, CSR, packaging, and sustainable products. The annual summary performance data collated from sustainability dashboard is published as part of ABFRLs Sustainability Report that is available publicly on its website (https://www.abfrl.com/sustainability/sustainability-reports/).
PS2: Labor and Working Conditions
ABFRL has around 24,500 on-roll direct employees which includes around 13,800 female employees (around 56% female representation) and around 80 specially abled employees. The company has around 14,000 contract or third-party workers for managing retail stores, housekeeping, and security. The retail stores alone account for around 12,500 staff which is almost 51% of the total workforce.
TCNS has employed around 4,305 people which includes 395 contract workers/ third party workers and 1,654 permanent women employees (around 42% of total direct workforce). Most of the contract workers (around 85%) are engaged at its 4 warehouses or engaged in other services. TCNS does not have any apparel manufacturing unit and relies on third party supply chain vendors (job workers).
Human Resource (HR) Policies and Procedures: ABFRL has multiple HR policies and procedures with clear articulation on prohibition of child and forced labour, non- discrimination, harassment, internal grievances redress, rights to collective bargaining and freedom of association, inclusiveness, and diversity at workplace. These policies also include commitment to strengthen health and safety management system and are generally in line with IFC PS requirements. ABFRL has also established specific overarching policies for retail workforce that are informed by the provisions of shops and establishment act and rules of respective states.
Working conditions and terms of employment of ABFRL employees as well as 3rd party employees are complying to labor regulations prevailing in respective States. Working hours and overtime (OT) practices followed at ABFRL is in line with labor regulations. The company has provided access to Alt Life (mobile application) for retail store and corporate staff through which staff can access various HR services. ABFRL has a detailed onboarding and induction training management system which includes technical, work related onboarding and training covering employee benefits and the HR policies and procedures of the company. ABFRL does not provide accommodation facility either for stores, warehouses or for manufacturing facilities.
TCNS has established HR management policies and procedures which will be evaluated and assessed in detail as part of the ESDD discussed under ESAP#1 above. TCNS HR policies include anti-discrimination and anti-harassment policies which are applied to everyone involved in TCNS’s operations including suppliers and distributors. TCNS, in addition to compensation that includes salary, allowances (including performance linked bonuses), employee stock options (ESOP) and growth and reward plans, provides its employees other benefits which include insurance coverage, medical reimbursements, yearly leave, retirement benefits and child education assistance, medical and accident insurance, wellness and physical health programs.
HR organization has been established at ABFRL till area or retail store level on the retail business division side. TCNS has its own HR organizational structure which will be integrated and updated within the ABFRL HR management system over a period, upon completion of the acquisition and based on ESDD findings discussed under ESAP#1.
Workers Organization: ABFRL has a registered union in one of its manufacturing facilities where long term settlement (LTS) was signed in early 2023 for a period of 3 years. ABFRL does not discourage union formation in any of the units or stores.
Grievance Mechanism: ABFRL has established multiple grievance mechanism options, which allows anonymous reporting. ABFRL has established Prevention of Sexual Harassment (POSH) framework as per the legal requirement at all its operations and all the POSH committee members undergo refresher training by an external facilitator. Third party employees have access to their respective employer GRM and POSH systems that are established in line with ABFRL requirements and HR policies.
Retrenchment: ABFRL has internal guidelines on retrenchment which clearly provides for avoidance of retrenchment. ABFRL has not undertaken any retrenchment in the last 5 years and has no plans for retrenchment during proposed TCNS acquisition as well.
As discussed under PS 1 above and as part of ESAP#1, ABFRL will evaluate the TCNS human resource policies and procedures specifically in the TCNS owned EBOs, warehouses and office buildings against IFC PS 2 requirements and implement a time bound CAP in agreement with IFC.
Occupational Health and Safety: ABFRL has implemented occupational health and safety (OHS) management systems certified to international OHS management system standard, ISO 45001:2018, and instituted appropriate safety organization across all its operations and business divisions. Additionally, the company carries out regular audits and third-party assessments to identify any possible gaps and take corrective actions. ABFRLs OHS roadmap and monitoring framework covers internal capacity building, training, implementation of standards & procedures, hazard identification & risk assessment, and emergency preparedness. OHS aspects are taken into consideration at the design and planning stage of new retail store projects.
ABFRL reports 81.9 safe million manhours, with zero 'severity 5' incidents (fatality) in FY22 and its OHS management systems were strengthened through remote monitoring system of safety equipment; model warehouse concept; and 3rd party fire & electrical safety audits of factories and warehouses. ABFRL also completed "Thermography Audit" of 52 retail stores and corrective actions were implemented. ABFRL also has established an annual, comprehensive health check-up program covering all its employees. At workplace, ABFRL has focused on employee well-being as one of the focus areas and worked on anemia management, workplace ergonomics and workplace noise and illumination as priority areas in FY22.
As part of ESAP#1, ABFRL will evaluate the occupational health & safety management systems and procedures followed in TCNS operations specifically in the TCNS owned EBOs, warehouses and office buildings and implement a time bound CAP in agreement with IFC.
Supply Chain: ABFRL has a vendor Code of Conduct (CoC) which elucidates the basic requirements that all factories, suppliers, and sub-contractors must meet to do business with ABFRL. The CoC is based on national laws and internationally accepted labor standards including ETI (Ethical Trading Initiative), ILO’s (International Labor Organization) core conventions, SA 8000 (social accountability certification standard) , and National Voluntary guidelines. The CoC covers specific PS2 requirements of supply chain and outlines five core focus areas including employee rights (No child/forced/compulsory labour, legal working hours, freedom of association and collective bargaining), health & safety and compliance with local laws in the supply chain.
ABFRL has established a supply chain management system covering all its vendors and suppliers and the supply management procedures, generally in line with IFC PS 2 requirements. ABFRL follows a comprehensive vendor selection process and conducts detailed audits during vendor onboarding including site visits. The CoC requires every potential new supplier factory to undergo a social compliance audit, while the existing ones are required to continuously maintain their performance, assessed through annual re-audits. ABFRL conducts regular post-onboarding audits on a sample set of vendors, which is an ongoing process to evaluate performance and works with vendors on mutually agreed corrective actions to improve performance against specific CoC requirements. Company uses its own Supplier Sustainability Index and Sustainable Apparel Coalition (SAC) Higg Index for evaluating vendors (https://apparelcoalition.org/the-higg-index/).
TCNS is fully dependent on third party suppliers for printed fabric, unprocessed fabric and trim materials, which are the primary raw materials used in the manufacture of its products. TCNS sources raw materials from approximately 200+ suppliers located across India. TCNS does not sign long term formal agreements or contracts with its suppliers and instead issue specific purchase orders in line with sourcing requirements each time. TCNS team (production, quality control team) regularly visit suppliers’ production facilities and offices to address any issues or bottlenecks.
TCNS does not own manufacturing facilities and engage job workers (ready-made garment manufacturers /garmenting units) for manufacturing all its products who are majorly located in the National Capital Region Delhi. TCNS job worker agreements specify that the job workers shall utilize their own manufacturing facilities, personnel and equipment and that the personnel utilized by the job workers shall remain on their rolls. As part of these agreements, TCNS retains the right to inspect the premises or facilities of the job workers during business hours. As part of ESAP#1, ABFRL will evaluate the supply chain management procedures of TCNS raw material suppliers and job workers and implement a time bound CAP in agreement with IFC, if gaps are assessed with regards to IFC PS 2 requirements.
PS3: Resource Efficiency and Pollution Prevention
Resource Efficiency: ABFRL is implementing resource efficiency measures for its consumption of energy, water, wastes, raw materials, as well as other resources and material inputs. In line with AB Group Policies on Sustainable Business Framework, ABFRL has completed the first phase of 'ReEarth - For Our Tomorrow' Sustainability 1.0 program that was launched in FY13. Since 2021, ABFRL has launched Sustainability 2.0 program that focusses on resource efficiency, green and net zero buildings, circular economy, and climate strategy and the performance is reported publicly on its website (https://www.abfrl.com/sustainability/sustainability-reports/) as part of Sustainability reporting.
TCNS Clothing has also been implementing resource efficiency measures as part of TCNS commitment to optimize energy consumption, reduce GHG emissions, and deploy renewable energy in its operations through continuous technological absorption, continual improvement programs to conserve energy and training of employees.
GHG Emissions: For ABFRL, the total GHG emissions (Scope 1 and 2) was reported to be around 41,000 ton carbon dioxide equivalent emission per annum. Once the TCNS acquisition is completed, ABFRL will start reporting the annual GHG emissions from TCNS operations in its Sustainability Report.
Water Consumption: ABFRL has adopted and implemented water conservation measures since 2013 as part of Re-Earth Mission. Water conservation goals targeted for 2025 include reducing water demand, enhancing recycle and reuse of wastewater, harvesting stormwater, artificial groundwater recharge, and offsetting through community watershed programs. ABFRL reports that due to sustained efforts, the Company has achieved water positive status in FY22 itself. Going forward, ABFRL has targeted to implement Net-Zero Water Buildings across its manufacturing units and warehouses.
Pollution Prevention: There are no major pollution sources in warehousing and retail store operations of TCNS except for power back-up diesel generator sets and sewage treatment plant for treating domestic effluent. As these operations are undertaken in leased or rented buildings, the land/building owner is responsible for pollution management as per permit conditions. The performance of pollution management systems are in line with local authorities’ requirements as there has been no pending legal actions from authorities concerned.
Wastes: In FY22, ABFRL generated about 3700 tons of non-hazardous wastes and 5 tons of hazardous waste. Hazardous waste generation include used oil, used batteries, bio-medical waste & others while the non hazardous waste streams included paper, fabric, metal, plastics, carton box, canteen waste, any other non-hazardous waste, coverall and construction & demolition wastes. As part of its Re-Earth Mission and Sustainability 2.0 goals with regards to waste management, ABFRL has been implementing initiatives under circular economy; sustainable packaging efforts; and delivering the extended producer responsibilities outlined for the sector. As part of Circular Economy initiatives, ABFRL is creating a closed loop system where waste generated is recycled, reused, or upcycled as useful resources and Zero Waste to Landfill (ZWTL) across all its facilities is achieved. In line with the goals established, ABFRL reports that it has achieved 'Zero Waste to Landfill across all its operations' and ensured 100% traceability of waste disposed to achieve circularity. Under sustainable packaging, ABFRL has a target to use 100% sustainable packaging material by 2025 and reports that it has achieved in 86.3% sustainable packaging by FY22. In packaging, ABFRL has started using biodegradable polybags as a substitute for high density polyethylene (HDPE)/Polypropylene (PP) polybags. ABFRL has also adopted "One Garment, One Tag" policy and plastic-free packaging in one of its branded products as part of EPR implementation.
Pest control operations in warehouses and retail stores have been outsourced to licensed third party pesticide service providers. As per prevailing pesticide use regulations in India, the 3rd party pest service provider does not use pest control products that fall in WHO Class Ia (extremely hazardous) and WHO Class Ib (highly hazardous) category.
PS4: Community Health, Safety and Security
ABFRL has implemented legal compliance management systems as part of its E&S management systems to ensure sustained compliance that relate to infrastructure and life and fire safety. All the legal compliances and permits with regards to building stability, building design/completion/occupation, lifts & walkalator usage, lifting tools and tackles and life & fire safety are maintained at all its operational facilities.
TCNS warehouses in New Delhi and retail network stores across India are in well-developed urban or peri-urban areas that have well developed road network. The transport fleet operations comply with relevant Indian regulations (Central Motor Vehicle Act and Rules), local municipal and traffic police regulations. Both ABFRL and TCNS relies on third party logistics service providers to transport the raw materials and finished products to and from the warehouses and to the retail store outlets. ABFRL enters into annual agreements with transport service providers and the vendor code of conduct principles are applied on them as well as part of supply chain management.
Security services at ABFRL locations has been outsourced to licensed third party security service providers. ABFRL has promulgated and implemented a Security Management Protocol and the security team is provided with necessary soft and hard skills training relating to prevention of sexual harassment (POSH), on-site safety, emergency response and life & fire safety systems
