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
Environmental and Social Management System
NAF assess and manage the E&S risks and impacts associated with their operations through compliance with applicable national standards and E&S regulatory permits and requirements. NAF Environmental and Social Management System (ESMS) is based on production, quality assurance and HR functions. NAF selectively apply the common elements of their ESMS to all company business activities. For example, carcass management is important for grower farms, but not at all for the feed mill. Components of the NAF ESMS related to food safety are certified ISO 22000 (Food Safety) and Hazard Analysis and Critical Control Points (HACCP). HACCP certification is an internationally recognized system for ensuring food safety by identifying potential food safety hazards (biological, chemical, or physical) at every step of the food production process and implementing control measures to prevent or minimize those hazards. For example, they have many Standard Operating Procedures (SOP) for aspects like farmhouse cleaning, manure management, air quality and odour control, among others. NAF also adhere the United States of America-based National Chicken Council (NCC) animal welfare standards in their farming and production processes.
Despite having all the above good practice elements of an appropriate ESMS, NAF currently lack key policy commitments, several IFC Performance Standard (PS) required management programs, and sufficient resources – both financial and personnel – appropriate to the nature and scale of the project and commensurate with the level of its E&S risks and impacts. For example, NAF do not currently have a dedicated environmental or social team assigned to manage E&S issues like emergency preparedness and response, stakeholder engagement, worker grievances, GBV, among others. To close this gap with PS1, NAF – with help from expert E&S consultants - will develop and implement an ESMS appropriate to the nature and scale of the project and commensurate with the level of its environmental and social risks and impacts (ESAP#1). This expanded ESMS will include key policy commitments, additional management programs, and sufficient organizational capacity required to further align NAF ESMS with IFC PS, World Bank Group (WBG) Environmental Health and Safety (EHS) Guidelines for Poultry Production, and good international industry practices.
Management Programs
In fiscal year 2025, NAF’s own managed farms produced over half of their total broiler bird output. The other 40% came from their network of 200+ out-growers. NAF provide hatchlings, animal feed, technical assistance, and a growers’ fee to these small-scale contract farmers in return for raising the chicks until processing age according to company standards. To promote out-grower compliance with national licensing and company standards, NAF has four field officers that support these contract farmers. These field officers provide training to farmers on animal husbandry practices, biosecurity protocols, and health management through workshops, seminars, and on-site programs. NAF field officers also assess bird housing conditions and health records, farmer adherence to biosecurity protocols, and monitor overall flock performance to promote product consistency, quality, and animal welfare across their contract farming operations.
Despite having all the above good practice operating procedures and training programs for contract farmers, these management programs do not currently include sufficient support measures required to improve out-grower E&S performance consistent with national regulations, IFC PS, and WBG EHS Guidelines. For example, insufficient support means limited frequency of technical visits to out grower operations for training and audits means that some farmers do not consistently implement the wastewater, chemical, and manure and carcass management programs required to meet compliance requirements. Failure to meet these requirements exposes NAF and their growers to possible fines and the loss of operating licences, and also can have adverse effects like air and water pollution. To resolve this gap, NAF will develop the E&S operational procedures and training programs required to support their contract farmers to improve compliance with applicable laws and regulations, IFC PS, and WBG EHS Guidelines. These programs and training will cover key issues such as wastewater management, chemical use, and disposal of manure and carcasses, among others (ESAP#2).
Organizational Capacity and Competency
As mentioned above on the NAF ESMS update, the company do not currently have a dedicated environmental and/or social team assigned to implement the policies and programs that will be developed as part of their ESMS update. NAF will establish an organizational structure that defines the roles, responsibilities, and authority to implement the ESMS (ESAP#3).
Monitoring and Review
NAF currently monitors and reports annually to statutory authorities on matters required for environmental and labor licenses. These include water quality testing and social security contributions, among others. The company also monitors workplace injuries, greenhouse gas (GHG) emissions, energy and water consumption, treated wastewater, and biological waste. NAF do not however currently monitor their implementation of key E&S management programs for worker and community grievances, stakeholder engagement, air quality, and contract farmer waste management practices, among others. For this reason, NAF will establish internal procedures to monitor and measure the effectiveness of their E&S management programs to track performance and verify progress towards desired outcomes (ESAP#4).
Ongoing Reporting to Affected Communities
NAF reports publicly about some of their E&S initiatives through social media and the Internet. Examples include antimicrobial resistance campaigns, adoption of sustainable soy as a key ingredient in their feed mix, and community development initiatives, among others. More about NAF stakeholder engagement activities is provided in the final section of this ESRS. However, NAF do not currently publish broader reports on their E&S performance including progress towards meeting their policy goals on employment, health and safety, resource efficiency, pollution prevention, etc. NAF will publish annual reports that describe progress with implementation of their E&S management plans and any issues that their stakeholder engagement and grievance mechanism have identified as of concern (ESAP#5).
PS2: Labor and Working Conditions
Human Resources (HR) Policies and Procedures
NAF has documented HR policies and procedures that are consistent with the national labor regulations and broadly aligned with IFC PS2 requirements. For example, each worker receives a written contract that describes their working conditions and terms of employment. Total number of NAF employees was 974 (603 men, 371 women) in January 2025. NAF do not employ contractors or contractor workers. New staff are provided with corporate inductions highlighting company HR programs on compensation and benefits, working hours, leave, and other worker rights and responsibilities. All employees are enrolled in the mandatory social security program. NAF pay policy reflects the skills and qualifications needed in different jobs and provides incentives for career progression within the company. IFC due diligence did not identify any cases or incidents of violations of statutory requirements for wages or benefits.
NAF HR policies prohibit the engagement of child, forced or bonded labor practices. Contextual risk screening of the project did not identify any risk of child labor or forced labor in the Sri Lanka poultry industry. Child labor and forced labor risks in the Sri Lanka poultry industry are generally considered low, as the organized sector is relatively formalized and regulated. NAF Poultry do not employ children or forced labor, and these practices will be formally prohibited in company’s HR policies as part of the ESMS update under ESAP#1.
NAF are in the process of undertaking a comprehensive gender diagnostic to identify gaps and opportunities for increasing women's economic participation and will provide capacity-building initiatives to support the inclusion of women out-growers in the value chain. At some farm locations the company provides some workers with housing accommodations. These accommodations include basic service requirements such as minimum space, water, cooking, sanitary, and washing facilities. Despite the consistency of these company HR policies and procedures with PS2 requirements, there are some gaps identified earlier on organizational capacity, grievance redress, GBV, and health and safety that NAF will address by implementing the agreed improvements to their ESMS as discussed in the PS1 section above in ESAP #1.
Non-Discrimination and Equal Opportunity
NAF HR policies encourage non-discrimination and equal opportunity for all employees. NAF have an anti-sexual harassment policy that reflects their commitment to providing safe, inclusive and respectful workplaces that are free from sexual harassment. The Policy applies to all NAF workplaces, and to all engagements between employees, clients or members of the public encountered while working. To support policy implementation, NAF have a network of volunteer Workplace Contact Officers (WCO) who are trained as a point of contact for colleagues experiencing harassment, discrimination, bullying, victimization or family violence. NAF Sexual Harassment policy and company Code of Conduct do not however explicitly address how to prevent Gender-Based Violence (GBV), including Sexual Exploitation, Abuse, and Harassment (SEAH). For these reasons, NAF will develop and implement a formal Gender-Based Violence policy (GBV) and implement relevant mitigation measures like specialized training materials to prevent GBV among their workers as well as an internal, safe, confidential and survivor-centered grievance redress mechanism (ESAP#6).
Workers’ Organizations
NAF does not prohibit the freedom of association or workers’ rights to form and join workers’ organizations. NAF encourages workers to participate in open communication to build and maintain a cooperative climate within the company. Despite this commitment NAF employees are not currently affiliated with any formal worker organizations. Instead, the company Participation Policy and Welfare Scheme provide forums for employees to participate in decisions that affect their interests, and for resolution of staff grievances.
Occupational Health and Safety (OHS)
NAF is committed to providing and maintaining safe working environment for the health, safety and welfare of all their staff, visitors and members of the public who may be affected by their work. They do this by identifying OHS risks in their business processes, assessing the causes of these hazards, and designing and implementing control measures to mitigate their likelihood and severity. Poultry farmers and workers face several Occupational Health and Safety (OHS) risks, including exposure to harmful pathogens and chemicals, which can lead to respiratory issues and infections. They are also at risk of injuries from handling equipment and animals, as well as musculoskeletal disorders due to repetitive tasks and heavy lifting. Additionally, long working hours and stressful conditions can contribute to mental health challenges.
NAF use both administrative and engineering controls to minimize exposure to OHS risks. Administrative measures include strict adherence to safety protocols and continuous supervision. Engineering controls, such as protective barriers, equipment maintenance, and ventilation systems, are designed to reduce physical hazards and exposure to harmful substances. PPE usage is aligned with specific job requirements, ensuring that workers are adequately protected against occupational hazards. NAF monitor key performance indicators including the use of personal protective equipment, record of injuries, frequencies of trainings, among others. The company reported a total of 132 minor injuries for a workforce of nearly 1000 people over the last two years. NAF management and OHS specialists meet regularly with workers’ representatives during company Safety Committee meetings. Despite having a number of appropriate OHS policies and programs in place, implementation of these measures can vary considerably across company operations and locations. The corrective actions described in the PS1 section above are also intended to improve NAF’s ESMS implementation for enhanced OHS management and results. For example, PPE use and air quality issues are not consistently monitored at all sites. More consistent monitoring and implementation could reduce injuries and respiratory effects to workers at the feed mill among others.
PS3: Resource Efficiency and Pollution Prevention
NAF poultry production and processing operations consume significant resources (electricity, fuel, water, feed) and result in considerable amounts of waste and emissions (animal wastes, wastewater, ammonia emissions from manure, GHGs). NAF are implementing several measures to minimize resource consumption, air emissions, and waste, for example: they introduced a GHG Data Management System (GHGDMS) to track resource usage, , diverting food waste to animal feed (piggeries), and poultry manure (litter) is sold to local farmers, providing a sustainable byproduct for agricultural use, among others. NAF monitors and mitigates the impacts of ammonia and odors from its operations. Key mitigations include safe manure removal, treatment, storage, and disposal practices and effective ventilation systems that help to dilute and remove ammonia-laden air by improving air quality.
Greenhouse Gases (GHG)
Electricity is primarily sourced from the national grid for most facilities. NAF also uses Liquified Petroleum Gas (LPG) and diesel as fuel for some processes and as back up electrical generators. Combustion from the boilers at the rendering plant accounts for a significant percentage of NAF GHG emissions. In 2023, NAF annual GHG emissions reached 14375 tones CO2 equivalent. The company will quantify its’ direct and indirect emissions annually and using internationally recognized methodologies (ESAP#7).
Pollution Prevention
NAF collect stormwater and wastewater from their breeder and broiler farm cleaning activities through a network of open earthen drainage canals that lead to unlined underground soak pits. Each shed operates on an all-in/all-out system, ensuring comprehensive cleaning and sanitation after each 7–8 week cycle. Stormwater and untreated wastewater from these activities can release pollutants, including toxic chemicals to surface water and ground water. NAF will develop and implement a Stormwater and Wastewater Management Plan (SWMP) to prevent pollutants and hazardous materials from their breeder and broiler farms from polluting surface water and/or ground water with nutrients, ammonia, sediment, pesticides, pathogens, feed additives, heavy metals, hormones, and/or antibiotics. The SWMP will identify opportunities to prevent or reduce wastewater pollution through such measures as recycling or re-use within their facilities, input substitution, or process modification (e.g. change of technology or operating conditions/modes). Application of wastewater treatment techniques may be required to further reduce the load of contaminants prior to discharge. (ESAP# 8). Through use of these technologies and good practice techniques for storm and wastewater management, NAF facilities will meet the Guideline Values for wastewater discharge as indicated in the relevant table of Section 2 of the World Bank Group Environmental, Health, and Safety Guidelines for Poultry Production (2007). The successful implementation of SWMP will be crucial to support the objectives of the Biodiversity Action Plan (BAP) discussed in the PS6 section below.
NAF effluent treatment plant (ETP) at their Hanwella processing plant discharges treated industrial process water to a nearby open field. Third party water quality lab reports taken at the point of discharge identified two cases of non-compliance with the WGB EHS Guidelines on water quality standards for the discharge of treated wastewater. To correct these non-compliances, NAF will identify and implement effective mitigation measures required to ensure that Hanwella process wastewater discharged to ground meets the applicable WBG EHS Guidelines (ESAP#9).
PS4 Community Health, Safety, and Security
NAF feed mill is located in an industrial area near the port of Colombo. Their corporate offices and processing plant are based in the rapidly urbanizing town of Hanwella some 30km east of Colombo. NAF breeder and broiler farms are spread around in smaller towns within a 60km radius of the Hanwella plant. NAF’s plans to expand production and retail capacity will be implemented at these existing operations and will not have any significant additional impact on the health, safety and security of local communities. NAF use of an Effluent Treatment Plant (ETP) at their processing facility, rendering plant for transforming dead birds, manure management practices, and comprehensive cleaning and sanitation schedule help to avoid and minimize adverse impacts on human health and the environment. To deal with any local traffic increase, the company raises driver’s awareness of safe driving. Each NAF facility has its own security workers who are unarmed and are also trained in emergency response. The corrective actions described in the PS1 section above are also intended to improve NAF’s ESMS implementation for enhanced Community Health, Safety, and Security management capacity and outcomes.
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
The Projects are within the Sri Lanka lowland rain forests EcoRegion. The Ecoregion is characterized by a high endemicity and has been impacted from clearing for agricultural and urban uses. Remnant forests remain within protected areas and intersperse private lands.
The Kaluandura and Lunugama farms are located within the Avissawella Alliance for Zero Extinction (AZE) site which has been triggered for the restricted range freshwater crab species Perbrinckia cracens (nationally and IUCN listed Critically Endangered (CR). The farms have been established for some time, and they are surrounded by both modified and natural habitats consisting of farmlands, remnant forests and streams. Surveys for P. cracens did not identify it within suitable habitats surrounding the farms. In streams and remnant forests surrounding the Kaluandura farm, several other endemic species were identified that are considered to trigger critical habitat, including Aplocheilus dayi (Day's killifish), and Oligodon calamarius (Templeton’s kukri snake) each of which are nationally and globally IUCN listed Endangered (EN) species. At the Lunugama farm, P. urophthalma (Tiger loach) was also identified and would trigger critical habitat. Semnopithecus vetulus (Purple-faced leaf monkey) was found at both sites and would be considered a priority biodiversity value.
The Company has agreed to implement a wastewater treatment system to manage discharges from the farms that will improve water quality downstream and constitute a net-gain for the aquatic species that have triggered critical habitat (See ESAP#6 above). For the terrestrial critical habitat species identified, there is unlikely to be any ongoing impacts and hence an additional conservation action is required. To outline what the management actions will be, a Biodiversity Action Plan (BAP) will be prepared by the client (ESAP #10) and will include community-based programs to reduce risks.
Regarding the primary production of chickens, the Company currently follows the National Chicken Council USA (NCC) welfare standards, however the company is not currently certified according to a recognized standard. To comply with the PS, the Company will be required to align its practices with an industry standard for the sustainable production of poultry in development of the ESMS (see ESAP #1).
NAF is supplied with animal feed that includes soy produced in the USA, maize from Pakistan and India and broken rice from local sources. The supply of soy from the USA has a low risk of deforestation and is compliant with the U.S. Soy Sustainability Assurance Protocol (SSAP). The supply of maize from Pakistan and India is also low risk given that these commodities are produced in regions with low deforestation risks. Broken rice production in Sri Lanka is associated with well-established rice production areas within lowland areas of Sri Lanka and is also not associated with deforestation risks. NAF will be required to update their procurement policies within the ESMS to include a Code of Practice and verification procedures related to commitments on no-deforestation.
