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
To manage the E&S risks and impacts related to ECOM’s direct and cocoa sourcing operations, the Company has developed and is implementing an ESMS aligned with the requirements of IFC Performance Standard (PS) 1. The ESMS is a living system under continues improvement. The general components of the ESMS are reviewed in the sections below and for cocoa sourcing under the Supply Chain section below and under PS2 and PS6.
Environmental and Social Policies: ECOM has Group level E&S policies that align with the relevant PS objectives, in addition to compliance with national regulations of the countries where ECOM operates. These policies relay the Company’s commitments to key areas such as climate change resilience, deforestation prevention, biodiversity conservation, sustainable farming practices, responsible chemical use, waste management, occupational health and safety (OHS), combating modern slavery, promoting equality, diversity, and inclusion, ensuring fair working conditions, stakeholder engagement and grievance management. To support the E&S policies, the Group has also developed policies related to labor and supply chain and has a Code of Conduct which its employees and contractors are required to meet. All ECOM’s policies are publicly available at: https://www.ecomtrading.com/about-us/ethics-and-compliance/.
Management of Risks and Impacts: The ESMS has processes to screen, identify, assess and manage E&S risks and impacts associated with its direct (existing and new facilities) and cocoa sourcing operations. The risk and impact assessments are governed by compliance with applicable national laws and regulations, E&S regulatory permits and requirements, IFC PSs and application of Good International Industry Practice (GIIP) common to the cocoa sourcing sector, customer requirements, and those within recognized and credible VSS such as Rainforest Alliance and Fairtrade. The ESMS also includes templates of key management plans such as Wastewater, OHS, Emergency Response and Stakeholder Engagement, to be developed further for a facility as needed, based on the type of activities and operational E&S risks identified.
Organizational Capacity and Competency: ECOM’s global E&S team includes an E&S officer, two E&S project managers and two data analysts, and is supported by ECOM’s global sustainability team that includes a cocoa sustainability officer and an ESG compliance manager. The global teams are responsible for developing the ESMS and managing and monitoring its implementation across ECOMs operations and coordinating data collection from the in-country teams, data analysis and reporting. The teams reports to an ESG committee, which is responsible for overseeing the Group’s sustainability strategies, goals, policies, procedures, performance and disclosures. The sustainable sourcing of cocoa in CDI and Ghana is led by a regional sustainability manager based in Abidjan and supported by E&S coordinators in each country, who work with the field teams to implement the Supply Chain risk management systems.
Emergency Preparedness and Response: As part of the ESMS, ECOM has a Group Emergency Response Plan template. Based on observations made during the site visit to the warehouse and drying facility in CDI, the Company needs to strengthen emergency signage, ensure that adequate fire-fighting equipment is in place, provide response emergency management training and undertake periodic fire-safety drills. As part of this investment, ECOM will i) undertake a Fire Safety audit of all warehouse and cocoa drying facilities in CDI and Ghana and implement any corrective actions and ii) develop an Emergency Preparedness and Response Plans (EPRP) for the facilities and in line with the requirements of Group, PS4 and World Bank Group General EHS Guidelines as necessary. (ESAP # 1).
Monitoring and Reporting: The Company has established a robust data collection, monitoring and reporting system. Key Performance Indicators (KPIs) for which, ECOM collects data from direct operations include labor, OHS performance, internal and external grievances, water and energy consumption, waste generation, Green House Gas (GHG) emissions, etc. KPIs related to sourcing operations include farmers and supplier data including training provided to them, amount of traceable cocoa sourced, farmers mapped, incidences of child labor, social and environmental initiatives undertaken such as the establishment of village savings and loans associations, numbers of trees planted among others. Furthermore, ECOM’s Smarter Cocoa Charter also includes a set of core sourcing related KPIs (see below) which ECOM is committed to publicly report on. ECOM produces an Annual Sustainability Report - https://www.ecomtrading.com/media/mh4bby2o/2023-ecom-group-sustainability-report.pdf and Cocoa Sustainability Report - https://www.ecomtrading.com/media/c0icf5to/2023-ecom-cocoa-sustainability-report.pdf.
Supply Chain: As a large commodity trader ECOM purchases commodities globally and is significantly exposed to risks of CL, FL and risks of habitat conversion in its supply chain. These risks are largely acknowledged by the Company in its different annual sustainability reports. In response to these risks a robust responsible Supply Chain Management System is deployed that includes supply chain policies, objectives and KPIs, country level risk identification, supplier selection, due diligence, onboarding, and monitoring, as well as specific and additional supply chain farmer programs in regions and commodities of high risk such as cocoa from Ghana and CDI.
For Cocoa, ECOM’s sourcing strategy is guided by their “Smarter Cocoa Charter”, which is structured across three pillars, (i) Improve farmer and worker livelihoods; (ii) Protect and regenerate nature; and (iii) Manage change through transparency and traceability, each having a set of commitments associated timebound targets.
ECOM has a Supplier Code of Conduct that defines mandatory requirements for all suppliers (direct and indirect) to comply with. These include all applicable laws, rules and regulations, respect for human rights and labour standards, such as the prohibition of child labour and modern slavery, ensure health and safety in the workplace, maintain traceability in supply chains, and engage in sustainable practices that support farmers and improve environmental impact. The Code also requires suppliers to report grievances confidentially, allow for audits and with any violations potentially leading to the termination of the business relationship. Compliance with the Supplier Code is a requirement through supplier agreements.
As part of its the Supply Chain Due Diligence Policy and Procedure, ECOM undertakes a supply chain risk assessment process for its direct and indirect sourcing through: (i) a contextual risk screening by country/commodity using publicly available risk assessment tools, such as CGIAR methodology, the Fairtrade Risk Map, Verité’s Responsible Sourcing Tool and Rainforest Alliance Risk Map. The two main risks identified in the production of cocoa in CDI and Ghana are those of the worst forms of child labor and risk of conversion of protected areas and critical and natural habitats; and (ii) a digital supplier self-assessment on the Sourcemap Platform. The self-assessment requests information about suppliers’ human rights and environmental policies and practices. Special focus is placed on suppliers’ readiness for traceability/transparency and on risk factors around forced labor, child labor, deforestation, and health and safety. It also covers certifications, environmental permits, and labor and wage practices, as well as checking suppliers’ knowledge of and commitment to ECOM’s Supplier Code of Conduct. The self-assessment results are analyzed together with the context risk assessment, commercial relationship and other supplier information to determine the supplier’s overall risk level. If a supplier’s risk level is low and their policies and practices are deemed sufficient to prevent and mitigate the human rights and environmental risks in their context, the supplier is maintained. Additional due diligence takes place for high-risk suppliers including assessment of the supplier from a human rights, labor and environmental perspective and improvement plans with clear objectives are stablished. As a last resort, if steps to prevent and mitigate negative impacts have failed or are not feasible, ECOM will disengage suppliers.
ECOMs Supply Chain risk management is implemented by the Sustainable Management Services (SMS) field teams. The field teams oversee programs related to environment, agroforestry, habitat protection, child protection, community development, and educational and financial support to farmers’ communities. ECOM also partners with several service providers, organizations and expert groups to support implementation of its programs. Based on the IFC site visits, both the Zamacom team in CDI and the ECOM team in Ghana, are well-structured with competent and experienced staff, and adequate for the activities conducted to support farmers and mitigate risks.
PS2: Labor and Working Conditions
At the time of this appraisal, ECOM directly employed 108 staff in CDI and 532 in Ghana (including Kiteko Ghana). Another 379 staff in Ghana were employed by contractors to provide field services (community development, agro-forestry, environment, etc.) to ECOM operations. The percentage of women in the workforce 10% and 16% respectively in CDI and Ghana respectively. In addition, both countries had service provision contracts with companies for janitorial, security services, and for forklift drivers, labor for loading/ off loading and stacking at warehouses. The latter is a seasonal activity, the numbers vary according to need. HR function was led by a Regional HR Manager based out of Accra and supported by a CDI HR Manager in Abidjan.
Human Resource Policies and Working Conditions: ECOM has Group HR policies applicable to all ECOM staff with commitments on non-discrimination and equal opportunities, sexual harassment, child labour, forced labor and the right to form or join organisations and bargain collectively. ECOM has a documented “Reglement Interieur” in CDI and a HR Manual in Ghana that makes provision related to working conditions and terms of employment (e.g. wages and benefits, overtime, working hours, leave, etc.) consistent with the national labor regulations and applies to all direct employees. All ECOM staff receive a written contract, payslips and are covered by medical insurance. ECOM’s Ghana operations has a union and a Collective Bargaining Agreement in place. In CDI, whilst there is no union in place, as per the labor laws, worker representatives have been elected at the workplace. Union or worker representatives meet periodically with management to discuss labor matters and working relations are generally good at both operations.
Truck drivers are directly employed on a full-time basis by Kiteko Ghana and in line with the ECOM HR policies and the Ghana HR Manual. At the same time, these drivers retain the services of a driver’s assistant on an informal basis. This has been identified as a potential labor and health and safety risk. As part of this investment, ECOM will formalize the employment relationship with the driver’s assistant (including the provision of written contracts with defined the roles, working terms and conditions such as minimum wage, working hours, rest days, etc., aligned with national legislation and ECOM policies and HR provisions in Ghana), undertake minimum age verification checks and enable the assistants to access the ECOM Labor Grievance Mechanism (see below). The assistants will not be permitted to drive vehicles unless they have a valid commercial driver’s license and have been formally trained, vetted and approved by Kiteko Ghana. Furthermore, ECOM will develop a Driver Code of Conduct that includes provisions against GBVH and provide GBVH and HIV prevention training and sensitization. (ESAP #2)
Labor Grievance Mechanism: The Company has a Speak Up policy and associated platform managed by an external agent and is open to all stakeholders including external. The platform has hotline numbers in each country of operations, which could be called upon to report issues including anonymously. The policy lacks an explicit process to receive and manage labor related grievances in a structured, timebound manner and as it is still being rolled out, so awareness and use of it in CDI and Ghana is low. In 2023, ECOM globally registered 73 internal grievances from its local operations relating to employee benefits, salaries, and health and safety, amongst other issues. No grievances were registered in CDI or Ghana. As part of this investment, ECOM will update the Labor Grievance Mechanism (LGM) to align with IFC PS 2 requirements. The updated mechanism will include resolution timelines for each step of the process, and a documented option for access to other judicial or administrative remedies for cases where raised complaints cannot be internally resolved. The LGM will also allow for grievances related to GBVH to be lodged and managed in a confidential and sensitive manner. Accessibility and sensitization of the LGM across all workers including those employed by contractors will be strengthened. (ESAP # 3)
Retrenchment. In 2023-24, ECOM subsidiaries in Ghana and CDI underwent through a restructuring process that resulted in several employees being retrenched in each country. The process followed was in line with the respective countries legal requirements and included engagement with union/ workers representatives as well as discussions with the government, the employer, and the employees. As part of this investment, ECOM will develop a Group Retrenchment Procedure to provide a consistent framework to guide any potential retrenchment process, informed by national requirements and in line with PS2 (ESAP # 4).
Workers Engaged by Third Parties: ECOM has developed a Contractor Management Standard Operating Procedure (SOP) that outlines the contractor/ service provider selection and onboarding process and Environmental, Health and Safety (EHS) minimum requirements. As part of this investment, ECOM will update this SOP to refer to applicable ECOM E&S policies, define labor requirements within the EHS specifications and establish contractor monitoring and audit requirements to be conducted by ECOM. The updated Labor and EHS specifications should be included in all contractor and service provider agreements. (ESAP # 5).
Occupational Health and Safety: ECOM’s Social Policy makes provisions for OHS including a target of zero accidents. To operationalize these provisions, ECOM has developed a Health and Safety Risk Assessment Procedure applicable to all facilities it operates. The Company also records and reports on OHS data, analyzes root causes for serious incidents and implements corrective actions as needed. In 2023, at the Group level the Lost Time for Injury Frequency Rate (LTIFR) was 7.68, mostly associated with coffee processing operations in Costa Rica, Colombia and Mexico. The warehouse and cocoa drying operations in CDI are not associated with significant OHS risks, with the LTIFR for CDI being 2.37 in 2023, and no serious incidents reported. However, OHS statistics associated with third party workers are not reported and the facility visited by IFC lacked implementation of OHS management. As part of this investment, ECOM will 1) develop a Group Health and Safety Policy; 2) update the OHS risks of its direct operations in CDI and Ghana; and 3) improve country/ facility specific OHS Plans to manage the risks of lifting and carrying heavy loads, working at height and slips and trips with associated training requirements. ECOM will also collect and report on OHS data for workers employed by contractors. Furthermore, dedicated OHS officers will be appointed to oversee OHS management in CDI and Ghana. (ESAP # 6).
Supply Chain: The risk and prevalence of child labor in both CDI and Ghana is high. The Smarter Cocoa Charter sets ECOM’s goals and targets to address the high risk of child labor in the cocoa industry in Ghana and CDI.
To manage the risks of Child Labour, ECOM deploys holistic community programs and interventions that include a Child Labor Monitoring and Remediation System (CLMRS) based on the methodology of the International Cocoa Initiative. The CLMRS uses community assessment surveys conducted annually, and household surveys conducted every two years to assess overall community risks on social themes and identify vulnerable children amongst the farmer households. In high-risk communities, ECOM’s field teams conduct additional unannounced visits. This information is then used to develop a community specific intervention program and remediation plan that includes actions to address identified cases of child labor but also programs to tackle the root causes of child labor such as awareness raising, income diversification programs, financial education and community saving schemes. Each farming community also has a committee, where community programs are discussed that is also a channel to receive grievances of child labor.
ECOM also participates in multiple multi-stakeholder initiatives tackling child labor. It is a founding member of two Jacobs Foundation-led funding facilities in the Ivory Coast: The Children’s Learning and Education Facility and the Early Learning and Nutrition Facility, both designed to address underlying causes of child labor. ECOM is a board member of the World Cocoa Foundation and the International Cocoa Initiative, both of which focus on addressing and preventing child and forced labor. Additionally, ECOM is a signatory to the Swiss Platform for Sustainable Cocoa and Beyond Chocolate, the Belgian initiative for sustainable cocoa, both of which include targets related to the eradication or reduction of child labor.
ECOM reports annually on the incidences of child labor in its supply chain. For the 2023-24 buying season, all identified cases of the worst forms of child labor in both countries had either successfully completed remediation or had action plans in place. 100% of ECOM’s sustainable cocoa bean supply chain in CDI and Ghana is covered by a CLMRS and intervention programs including that associated with its partner suppliers. To date no incidences of forced labor have been reported in ECOM’s cocoa supply chain in CDI and Ghana.
ECOM has commissioned a third-party evaluation of its CLMRS and its implementation in each country, with results expected in Q4 2024. As part of this investment, ECOM will share the findings and associated plans, as necessary, to implement recommendations coming out from the evaluation of the CLRMS, with the IFC. (ESAP # 7). Furthermore, ECOM will undertake a review its partner suppliers’ supply chain management system (including the CLMRS), in line with ECOM’s due diligence policy. The scope of the review as well as any time-bound action plans established with the partner suppliers will be reviewed by the IFC and adjusted as necessary. (ESAP # 8).
OHS risks associated with cocoa cultivation are typically associated with the improper use of machetes, carrying heavy loads and the potential exposure to crop protection products due to poor application practices. ECOM SMS field staff provide training to the farmers on such risks and associated good practices. Furthermore, specifically for crop protection products, guidelines are in place on the proper storage of chemicals, disposal of empty containers, cleaning of equipment, and appropriate use of required Personal Protective Equipment (PPE) to mitigate potential environmental, and occupational health and safety risks.
PS3: Resource Efficiency and Pollution Prevention
Most of the Scope 1 and 2 GHG emissions associated with ECOM activities in CDI and Ghana are associated with electricity consumption and fuel use in their direct operations – offices, drying operations and logistics and transportation. ECOM reports on GHG emissions associated with their cocoa operations and supply chains and has established a carbon reduction roadmap that identifies key actions and targets to reduce their carbon footprint, including farm-level traceability that will help certify the deforestation free provenance of cocoa sourced by ECOM. Around 20,000 litres of diesel fuel is used each season to operate the boiler for drying cocoa beans.
The Group Environmental Policy makes adequate provisions for water, wastewater and waste management. CDI and Ghana this is limited to office activities and operations of the facilities. The cocoa beans are fumigated for pest control using an approved pesticide applied by licensed and trained service providers. Waste generated from the warehouse (used sacks, waste beans or other organic matter) is sold to vendors for reuse/recycling or disposed of in authorized landfills.
PS4: Community Health, Safety and Security
The warehouse in San Pedro is in the port area and has limited risks associated with community health and safety.
In CDI, transportation of the beans from the farms and cooperatives is the responsibility of the farmers and is not a project activity. Cooperatives or middlemen, deliver the raw materials to the warehouse and then return to their homes in their vehicles. The Company does not have any direct control or influence over how these trucks are operated. In Ghana, ECOM has a logistic subsidiary that it uses to take the beans from the purchasing points to the district warehouses, and for which a Transport Management plan in line with PS 4 requirements has been developed.
As cocoa is a valuable commodity, risk of theft is high. ECOM uses security personnel provided by vetted third-party service providers for its warehouses. In certain instances, some of these personnel are armed. ECOM’s Social Policy makes provisions on security management including on the use of force. As part of this investment, ECOM will undertake a Security Risk Assessment for each site requiring armed security and develop a Security Code of Conduct and a Protocol on the use of force consistent with PS4 requirements including IFC’s “Good Practice Handbook on the Use of Security Forces: Assessing and Managing Risks and Impacts” as necessary. The Code and the Protocol will be included in the contracts with the security service providers and communities sensitized on how security related grievances can be reported via the Speak Up platform. (ESAP # 9).
PS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources
ECOM sources cocoa beans produced in regions of CDI and Ghana where there is a risk of significant conversion of natural and /or critical habitats.
Driven primarily by the European Union (EU) Regulation on Deforestation-free Products (EUDR), ECOM has developed an internal Deforestation Risk Management System that consists of i) 100% traceability to polygon for >4 ha or GPS point for <4 ha farms, ii) an automated deforestation risk verification platform called the ECOM Research Deforestation Analysis (ERDA) and iii) a Deforestation Verification Protocol to verify the identified risks. ERDA measures deforestation risk and impacts using radar-based remote sensing technologies, which could allow for more precise measurements of deforestation that has occurred since December 30, 2020 (set as the cutoff date set by the EUDR), in an agricultural context than publicly available datasets. If potential deforestation is identified, as per the Protocol, ECOM undertakes desk-based checks of location data, analyzes high resolution satellite imagery, and trained field teams follow up with farm visits to evaluate the age of plantations and historical land use. Suppliers which do not satisfy the verification checks enter a process to disengage. ECOM applies the Deforestation Risk Management System to all cocoa beans sourced directly by ECOM entities or via partner suppliers, irrespective of whether or not the beans are destined for EU markets.
More than half of 2023-24 bean volumes were certified by standards designed to remove habitat conversion risk (Rainforest Alliance) and to facilitate access to premium markets. The Company has, in partnership with various organizations (e.g., Cocoa and Forest Initiative), established or joined programs to reduce deforestation and promote reforestation.
As part of this investment, ECOM will carry out an assessment of the implementation effectiveness of ECOM Research Deforestation Assessment tool (ERDA) as part of their annual due diligence system reporting obligations per the requirements of EUDR. Where material gaps are identified, ECOM will take report to IFC on corrective actions undertaken. (ESAP # 10).
