PS1: Assessment and Management of Environmental and Social Risks and Impacts

Policy and Environmental and Social Management Systems. BPC has adopted an Environmental Policy, an Occupational Health and Safety Policy and an Integrated Management System (IMS) Policy, broadly aligned with the objectives of IFC’s Performance Standards.

An Integrated Management System (IMS) has been implemented for BPC's overall business activities, certified according to ISO 9001:2015 (Quality Management), ISO 14001:2015 (Environmental Management), and ISO 45001:2018 (Occupational Health and Safety). The IMS applies to all aspects of BPC's operations, including the transmission and distribution of electricity, and is applicable to BPC headquarters and its 19 regional centers (Electricity Services Divisions). The scope of the IMS covers environmental and health and safety aspects but was found to be lacking in terms of assessment and management of social and biodiversity risks and impacts. The IMS was also found to lack specific management procedures, as well as auditing and reporting frameworks, to periodically monitor the E&S performance of the company’s assets, particularly lacking a tailored focus on construction activities.

IFC also reviewed the implementation of E&S safeguards at the substation site at Panbang, where the civil contractor has mobilized and initiated site clearance and foundation works. It was noted that the contracted agency had not implemented specific standard operating procedures (SOPs) for E&S management, and current management practices are solely guided by adherence to applicable legal requirements. Furthermore, the contractor on site does not have a formal policy demonstrating commitments to environmental, health, safety, and social aspects. No formal mechanisms for monitoring and reporting were noted.

As per ESAP#1, BPC will augment its existing IMS into an Environmental and Social Management System (ESMS), formalizing and updating the requirements for E&S procedures and plans in line with the regulatory framework, IFC PS requirements, relevant WBG EHS Guidelines and GIIP. The updated ESMS will, at a minimum, include (i) procedures for conducting ESIAs to international standards, incorporating environmental and in particular biodiversity, climate change and social aspects; (ii) procedure for land purchase/lease, including policy/guidelines compliant with IFC PS 5-8 requirements; (iii) EHS procedures for construction impacts, contractor oversight, and labor camp standards; (iv) appropriate E&S organization, with responsibility and resource allocation along with training, and monitoring mechanisms; (v) dedicated emergency preparedness and evacuation plan (including for climate-related emergencies) for construction and operation stage activities as per IFC PS 1 requirement; (vi) operational control procedures (OCPs) for OHS for construction and operation stage activities, aligned with IFC PS requirements and GIIP, integrating and updating the OCPs already in place; (vii) stakeholder engagement framework and community grievance mechanism including grievance mechanism for construction stage workers meeting PS1 and PS 2 requirements;. BPC will ensure the effective implementation of the ESMS requirements (as outlined in ESAP #1), across the project.

Identification of Risks and Impacts and Management Programs. BPC identifies and manages E&S risks and impacts associated with its operations through compliance with applicable national standards and E&S regulatory permits and requirements. Identification of E&S risks is conducted in accordance with ISO14001 and ISO 45001 requirements; BPC has established and maintains processes for identifying the E&S risks and impacts of its operations, consistent with good international industry practices and utilizing standard tools such as Hazard Identification and Risk Assessment (HIRA) and the Environmental Aspect and Impact (EAI) Matrix. Specific HIRA and EAI Matrices have been developed for BPC’s operations.

Operational Control Procedures (OCPs) have been designed to address key safety, environmental, and operational risks across work sites, including hazards like work at height, confined spaces, electrical safety, and fire hazards. They also address environmental risks such as leakages and spillages, waste disposal, pollution, and land contamination, promoting sustainable practices. These procedures aim to ensure a safe, efficient, and environmentally responsible work environment.

BPC has obtained an Environmental Clearance (EC) from the Department of Environment and Climate Change (DECC), Royal Govt. of Bhutan for the construction of the substation at Panbang. An Initial Environmental Examination (IEE) along with an Environmental Management Plan (EMP) was developed as part of the EC process.The civil contractor deployed at the substation site has prepared an EMP for the construction stage; however, the plan lacks specific details to address construction-stage risks and impacts related to occupational health and safety, waste management, engagement of contractual workforce, worker accommodation, grievance mechanism and other aspects. Furthermore, no formal mechanisms for monitoring the implementation of the EMP were noted.

It was also informed that an electrical and mechanical (E&M) contractor has been selected by BPC, who has recently deployed at the site; however, this contractor has not yet shared their EMP with BPC. So as per ESAP#2, BPC will ensure the contractors' EMPs for the Panbang substation are updated into construction-stage Environmental and Social Management Plans (ESMPs) consistent with national laws and standards and aligned with IFC Performance Standards (PS) and WBG EHS Guidelines. The ESMPs will include necessary E&S action plans and procedures such as an Occupational Health and Safety Management Plan, Waste Management Plan, Contractor Management Plan, Labor Management Plan, Worker Accommodation Guidelines, Environmental Monitoring Plan, Stakeholder Engagement Plan, Grievance Redress Mechanism, and others as applicable. Additionally, they will include specific frameworks and protocols for monitoring ESMP implementation and reporting.

Organizational Capacity and Competency. The E&S function of BPC at the corporate level is managed through the Environment, GIS, and Survey Section, which is housed within the Construction Division of the Construction and Procurement Department. The corporate E&S team comprises two environmental officers and two assistant environmental officers, with defined roles, responsibilities, and the authority to manage the E&S performance of assets under BPC’s management. The E&S team reports to the General Manager of the Construction Division, and he reports to the Director of the Construction and Procurement Department, who has direct access to the CEO and the BPC Board.

The E&S team is supported by the corporate HR team (comprising the HR Management Section and the Admin & Employees Relations Section, under the Corporate Services Department) and the operational teams from the Transmission and Distribution Departments. At the regional level, each Electricity Services Division (ESD) has Health and Safety (H&S) representatives and safety committees to assist the corporate team in implementing the IMS and other H&S plans and procedures.

Emergency Preparedness and Response. Currently, there is no Emergency Preparedness and Response Plan (EPRP) available for the project to address potential emergency scenarios such as earthquakes, floods, fires, community unrest, oil/chemical spillages, etc. As part of ESAP#3, BPC will ensure that an on-site EPRP, aligned with IFC PSs, is prepared and implemented at the Panbang substation site. The EPRP will include the identification of potential site-specific emergency situations (including climate-related emergencies) and appropriate response measures. It will define the emergency response organization, identify internal and external responders, and maintain a list of emergency response equipment at the project site. Additionally, BPC’s existing procedure for incident investigation will be integrated with the EPRP to analyze and document any accidents or incidents occurring during the construction and implementation stages of the project.

Monitoring & Reporting. Internal and external audits are conducted to review the status of IMS implementation at the corporate headquarters and the ESDs (regional centers). However, as mentioned earlier, formal mechanisms for monitoring and reporting on the implementation of E&S plans and procedures across the project are currently not in place. As part of the ESMS implementation (ESAP#1), BPC will develop a comprehensive monitoring and reporting plan for the project, covering: (a) construction and demobilization stage activities, and (b) operation and routine maintenance activities.

PS2: Labor and Working Conditions

As of Dec 2024, BPC employs 2,221 staff members for its existing operations, comprising approximately 19% females and 81% males. This includes 2,206 regular employees and 15 contractual employees; the contractual employees are mostly limited to senior management positions in the company, including the CEO, Directors, and General Managers. For the construction of the substation at Panbang, 43 workers and 3 supervisors have been deployed on-site through the civil contractor. An E&M contractor has also been selected and is expected to mobilise at the site. BPC’s project team at the site includes a Project Manager and three site engineers.

Human Resource (HR) Policies and Procedures, Working Conditions and Terms of Employment. In accordance with the provisions of the Companies Act of the Kingdom of Bhutan (2016) and the Labour and Employment Act of Bhutan (2007), the BPC Service Rules and Regulations (SRR) have been developed and adopted; the SRR was last updated in 2022. As part of the SRR, BPC follows a structured HR policy framework designed to ensure fairness in recruitment, employee development, and retention at the organizational level. The SRR covers recruitment and selection, service conduct, remuneration and benefits, working hours and overtime, leaves, grievance redressal, and separation. Appointment letters are issued to staff upon joining, outlining working conditions and terms of employment. Induction training is provided to new staff members to familiarize them with HR policies and procedures. The existing HR policies and procedures (as part of the SRR) apply to BPC’s regular and contracted employees; however, they do not extend to contractors' workforce deployed at BPC sites or third-party workers engaged through service providers/manpower contractors. The contracts executed between BPC and its contractors requires the selected contractors to ensure compliance with requirement under local labor laws, but formal mechanisms for periodic review and monitoring are currently lacking. IFC noted that third-party workers engaged for construction works through sub-contractors (manpower contractors) at the Panbang substation site, had not been provided with formal engagement contracts. However, the sub-contractor was found to maintain the necessary documentation to demonstrate compliance with national labor laws.

As per ESAP#4, BPC will update its HR policies and procedures (including strengthening of existing policies or developing new policies), as applicable to employees as well as contract/third party workers, in line with applicable regulations and IFC PS 2 requirements, which among others will duly cover documented procedures relating to compliance with applicable labor laws, equal opportunity and nondiscrimination, freedom of association and collective bargaining, prevention of child labor and forced labor, avoidance of gender based violence and harassment (GBVH), worker accommodation, and contract employees access to a grievance mechanism. BPC will communicate applicable policies to all employees and workers, including third party workers, to ensure their effective enforcement and organise training and awareness programs on the policy provisions for all categories of workers.

Freedom of Association. Currently there are no staff unions at BPC. The company does not restrict formation of any worker associations and BPC’s IMS Policy includes a specific commitment to the consultation and participation of workers, and, where they exist, worker's representatives. Going forward, as per ESAP#4 formal policies on freedom of association will be developed and BPC will organise training and awareness sessions to sensitize staff about its policy/position on freedom of association and collective bargaining.

Non-discrimination and Equal Opportunity. BPC promotes equal opportunity among employees, prohibiting discrimination of any nature. BPC’s SRR emphasizes about equal opportunities for promotion and career advancement to all employees and no cases of discrimination were observed during the appraisal. Going forward, as per ESAP#4 formal policies on non-discrimination and equal opportunity will be developed and will made applicable to all aspects of BPC’s operations.

Grievance Mechanisms. BPC has a documented grievance handling policy and procedure and the same is communicated to the employees through induction trainings. An aggrieved complainant can submit a written complaint identifying the other party, the location, and the subject of the dispute. The designated officer will acknowledge receipt within two working days and commence investigation within five working days. The complaint will be addressed within ten working days from the commencement of the investigation. If unresolved, the complainant can notify the Ministry of Labor and Human Resources to declare a labor dispute. BPC further informed that no grievances have been reported in the past three years. In course of the appraisal, it was noted that there is no anonymous avenue to register grievances, and no defined process has been established for contract workers, involved with construction work at the Panbang substation, to access BPC’s grievance redress system. As per ESAP#4, BPC will update its HR policies and procedures that meet local regulatory requirements to include anonymous channels for registering grievances and extend relevant provisions of IFC PS2 and grievance mechanism to contract workers and implement procedures to oversee compliance with labor laws and PS2 requirements.

Prevention of Sexual Harassment. BPC has developed a framework prohibiting sexual harassment at workplace, as part of its SRR. The framework aims to eliminate incidents of sexual harassment, establish guidelines addressing such behavior, and introduce procedures for dealing with sexual harassment complaints. BPC has developed internal mechanisms for investigating and reporting complaints; however, employees are free to choose whether to report such cases internally or access external legal channels through the Ministry of Labor and Human Resources. BPC stated that the most recent case of sexual harassment was reported in 2022. After an investigation by the internal committee, the case was referred to legal authorities, and the offender's employment with BPC was terminated upon confirmation of the offense.

The holding company, DHI, has adopted a policy framework on gender equality, which is applicable to all its group companies, including BPC. The framework aims to streamline mechanisms for addressing gender related issues and improving the working environment, including handling workplace harassment. It also focuses on building gender awareness and understanding, and to integrate gender considerations in planning and management practices.

Protecting the Workforce: BPC indicates its commitment in respect of child labor through its SRR. The Company does not employ anyone below 18 years of age. Based on observations during the appraisal, no instances of child labor or forced or bonded labor were noted. Going forward, as per ESAP#4 formal policies on prevention of child labor and forced labor will be developed and will made applicable to all aspects of BPC’s operations.

Occupational Health & Safety (OHS) Management. BPC’s OHS Policy aims at maintaining a healthy and safe working environment by identifying, assessing, and controlling workplace hazards; it emphasizes informing employees of known or reasonably foreseeable health and safety risks associated with their work. The IMS implemented across BPC's business activities duly incorporates OHS aspects and is certified under ISO 45001:2018 (OHS). BPC has identified the OHS risks consistent with good international industry practices, using standard tools such as HIRA. The HIRAs have been developed considering BPC’s operations across offices, substations, switchyards, and transmission and distribution systems. Specific management procedures have been developed to address key risks related to work at height, working in confined spaces, slip and fall, hazards due to machine works and operating power operated tools, electrical safety, falling objects and slippage of heavy materials, collapse of fabricated structures, exposure to water pressure, handling and usage of LPG cylinders, welding and gas cutting, leakage of gas/SF6, and fire hazards. Personal protective equipment (PPE), such as safety shoes, hard hats, and reflector jackets, is provided to staff and workers as needed. In the past three years, BPC reports that there has been no fatal workplace accident at any of its operational assets. The company maintains an injury register to document injuries and accidents. A review of the tracker shows a declining trend in non-fatal accidents over the past three years (five accidents were reported in 2022, two in 2023, and none in 2024).

In course of the appraisal, it was noted that the civil contractor deployed at the Panbang substation site, has prepared an EHS Plan briefly listing the typical OHS hazards and control measures; however, formal mechanisms for monitoring the plan's implementation were not observed. As per ESAP#2, BPC will ensure that a specific OHS Plan tailored to the project, is developed as part of the ESMP. The ESMP will incorporate comprehensive frameworks and protocols for monitoring and reporting.

Workers Engaged by Third parties. Third-party workers are engaged by the civil contractor for construction works at the Panbang substation site through manpower subcontracting agencies. These workers are mainly semi-skilled or unskilled, with their employment duration varying according to the tasks assigned. IFC observed that the third-party workers have not been provided with formal engagement contracts; however, overall compliance with national labor laws was noted. While BPC has supervisors at site, they were not monitoring the labour contractor or checking labour compliance.

In line with ESAP#5, BPC will ensure that all contractual workers receive formal engagement contracts that clearly define terms of engagement and working conditions, aligned with National Labor Laws and IFC PS2 requirements. Additionally, BPC will establish procedures and build capacity to regularly review and monitor the performance of its contractors, particularly concerning working conditions, worker accommodation, occupational health and safety, and workforce protection.

Labor Accommodation: The labor camp at site houses 43 workers and 2 supervisors. The camp was made of tin sheds, with 3-4 people sharing a room. Because of space constraints at site, the camp was cramped. There was a common kitchen area allowing workers to cook their food which had unsafe wiring and wet floor. No storage was provided to workers. Most the workers are from India, brought to the site through labour contractors. The contractors maintained registers of payment and overtime and no grievances around late payment or payment less than agreed wages was identified during consultation. To address labor accommodation gaps, the ESMP under ESAP #2 will include Worker Accommodation Guidelines, aligning with local laws and IFC-EBRD standards. These will guide contractors on improving living conditions, sanitation, and vector control at the labor camp.

The Civil Contractor has temporarily leased 1.79 acres from a single landowner for setting up the labor camp. Discussions with the landowner revealed that no formal lease agreement has been executed. The leased land was not in productive use, as the landowner's earlier attempt to cultivate hazelnuts on the land was unsuccessful. As part of the arrangement, the contractor has agreed that instead of any monetary lease amount, he will clear all construction waste and debris, properly level the land, and leave the structures (tin sheds) erected by the contractor for the landowner’s future use before demobilization and returning the land.

In accordance with ESAP#6, BPC will ensure that a formal lease agreement is executed between the landowner and the Civil Contractor for the temporary lease of land used for setting up the labor camp at the Panbang substation site. The agreement will clearly outline the contractor’s responsibilities for site restoration prior to demobilization, as well as other commitments agreed upon with the landowner.

PS3: Resource Efficiency and Pollution Prevention

Resource Efficiency and Pollution Prevention. During the construction stage, the key resources required include water, electricity, fossil fuels (diesel), and construction materials such as cement, sand, aggregates, and reinforcement bars. Electricity is sourced from the national grid, while water is extracted from an existing perennial stream after obtaining the necessary approvals from the block administration. The construction materials and diesel is procured from authorized vendors. For the operational stage, BPC plans to adopt similar arrangements for sourcing water and electricity, with the demand expected to be minimal due to the nature of activities involved.

The civil contractor deployed at the Panbang substation site has developed an EMP for the construction stage. However, the contractor’s EMP lacks specific details on construction risks and impacts, and no formal mechanisms for onsite E&S management or monitoring are currently in place. As outlined in ESAP#2, construction-stage ESMPs consistent with national legislation and aligned with IFC PS and WBG EHS Guidelines will be developed and implemented at the substation site. Additionally, specific frameworks and protocols will be established for monitoring ESMP implementation and reporting.

Greenhouse Gases (GHG) Emissions: The electricity for the operational substation and DCCs will be sourced from the grid which is mainly from hydro power. Based on the available information on fuel and electricity requirements, the project considered for IFC financing is not expected to produce more than 25,000 tons of CO2-equivalent annually (Scope 1 and Scope 2 emissions).

Air Emissions and Noise. Air emissions from the project during the construction stage will be temporary and limited to fugitive dust generated during earthworks and exhaust emissions from construction vehicles and equipment. Noise will be produced by construction equipment and vehicles but will be intermittent and for a limited duration. Emissions and noise during the construction phase will be managed in accordance with the updated construction-phase ESMP, as outlined in ESAP#2. Air emissions and noise generation during the operational phase are not expected to be significant.

Water and Wastewater. The water requirement during the construction stage is limited to construction activities (such as concrete preparation and curing), domestic use in labor camps, dust suppression, and general housekeeping. At the Panbang substation site, this requirement is met through water extracted from a local stream (Jerang Gang) after obtaining necessary approvals from the Ngangla Gewog (block) administration. The sewage generated from the labor camps is managed through septic tanks installed on-site. Construction effluents and runoff will be managed in accordance with the construction-phase ESMP, as outlined in ESAP#2. For the operational substation, freshwater demand and domestic wastewater generation are expected to be minimal and will be managed using arrangements established during the construction stage.

Hazardous Materials. During the construction phase, hazardous materials will be limited to paints, solvents, oil and lubricants and will be managed in accordance with the construction-phase ESMP, as outlined in ESAP#2. Operational stage hazardous material will include chemicals that relate to insulation, repair and maintenance, housekeeping and pest control. The chemicals will be stored in small amounts in authorized access areas and will be managed and handled per the measures defined in their material safety data sheets.

Solid Waste management. Solid waste generated during the construction stage typically includes materials such as concrete debris, scrap metal, packaging materials, plastic, wood, food waste from labor camps, and other construction-related refuse. Recyclable materials will be stored onsite and periodically recycled through external agencies, while the remaining waste will be disposed of through the Dzongkhag (district) administration. Overall, waste management will be carried out in accordance with the construction-phase ESMP, as outlined in ESAP#2.

During the operation of the substation, a limited amount of solid waste will be generated, including packaging materials (such as cardboard, plastic, and pallets), scrap metals, used cables, maintenance waste (filters, rags, gaskets), e-waste (discarded electrical and electronic equipment), and general office waste. This waste will be managed in accordance with BPC’s waste management SOP.

PS4: Community Health, Safety and Security

Infrastructure and Equipment Design and Safety. The operational facilities of BPC are designed and managed in compliance with national electrical safety legislation. BPC’s safety management system manual considers a comprehensive framework for identifying and managing hazards and risks in accordance with relevant requirements of the Safety Regulation and Safety Code (2008) of Bhutan Electricity Authority. Annual inspection and maintenance regime is followed for electrical equipment in substations and switchyards. Similar standards and protocols will be adopted the proposed substation at Panbang.

Emergency Preparedness and Response. BPC’s offices and facilities visited during the appraisal were observed to have life and fire safety (LFS) measures in place. These include fire detection and alarm systems, fire extinguishers, manual call points, and fire exit signage. A specific emergency organization is established, with wardens assigned to manage emergency response at individual floor levels. Regular training sessions on fire safety, emergency response, and first aid are conducted in collaboration with external agencies, and fire/emergency mock drills are periodically organized. During the site visits, the Panbang substation site was observed to be equipped with fire extinguishers. Additionally, the use of electric induction ovens for cooking at the labor camps has eliminated the use of LPG/firewood, reducing the risk of fire. However, a specific Emergency Preparedness and Response Plan (EPRP) has not yet been developed for the substation site.

As part of ESAP#3, BPC will ensure that an on-site EPRP, aligned with IFC PSs, is prepared and implemented at the Panbang substation site. The EPRP will identify potential site-specific emergency situations and outline appropriate response measures.

Security Personnel. The security arrangement at the BPC headquarters is managed by a third-party security agency. The agency deploys unarmed security personnel, including female staff, who are trained to manage entry and exit gates, vehicular movements, parking lots, and other areas within the office premises. The company reports no security incidents in the past.

PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources

The project is in the Brahmaputra Valley semi-evergreen forests Ecoregion which consists of tropical broadleaf forests across northern India and Bhutan.  The ecoregion has been extensively modified apart from intact forests within the protected area network. Primary forests in the Ecoregion play host to widely distributed mammals and birds with little endemism. The project lies adjacent to the Royal Manas National Park (RMNP), a Key Biodiversity Area (KBA) which is located on the opposite bank of the Mangdechu River. A State Reserve Forest is located immediately adjacent to the Project of which a small portion (200m2) will be cleared for the substation. 

A site appraisal, consultation and desktop review did not identify any priority biodiversity values associated with the Project area and immediate surrounds. It is unlikely that critical habtiat values are associated with the adjacent KBA however to reduce risks during the construction and operation of the sub-station, the ESMP to be developed under ESAP#2 will include specific guidance for contractors, in the form of a Contractor Management Plan, for forest clearance activities and to restore the site using native species to compensate for the forest cleared.

Regarding ecosystem services, the Galing community forest (CF) near the substation site is utilized for fuel wood and construction material collection, with oversight maintained by the Community Forest Management Group (CFMG) which regulates access and issues permits for sourcing materials from the forest. There is unlikely to be any ongoing affects to the forest used by the community.