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The International Finance Corporation (IFC) – part of the World Bank Group - has adopted new environmental and social standards applicable to its financing activities The new rules expand upon the IFC’s existing standards but also include important new sections requiring adherence to labour standards and other human rights and social issues.
The Policy and Performance Standards on Social & Environmental Sustainability will apply to lending and financing undertaken by the IFC and include stronger requirements on community engagement and consultation; biodiversity protection; community and worker grievance mechanisms; use of security forces and greenhouse gas monitoring. In addition there are new sections dealing with community health, safety, and security; labour conditions; pollution prevention and abatement; integrated social and environmental assessments; and management systems. Clients will be required to have in place effective management systems to manage these issues. In addition, there is a greater requirement for disclosure of information to the public by IFC and client companies.
On labour issues the Performance Standard 2 (PS2) commits IFC clients to respect the following:
- Freedom of association and collective bargaining - Non-discrimination and equality of opportunity - Freedom from child labour - Freedom from forced labour - Retrenchment – the core requirement of which is to have a retrenchment plan based on consultation and non-discrimination - Working relations – the documentation and communication of conditions - Working conditions – compliance with collective bargains or, where these are not in place, national law minimums on matters such as pay, hours, etc - Grievance mechanisms – an appropriate procedure must be in place for workers - Human resource policy - the client is also expected to have a human resource policy in place. The Performance Standard is understood to expressly extend to non-employee workers. IFC clients are expected to consider employer integrity issues with regard to intermediaries supplying contract labour. The client is also expected to require sub contractors to comply with the Standard. There are further requirements to look at the supply chain impacts where low labour costs are a factor and also to assess and address issues of forced labour and child labour in supply chains.
The new IFC standards constitute the most comprehensive and advanced set of policies among international financial institutions and set an example other IFIs may well follow. The IFC also expects the private sector banks backing the Equator Principles to adopt the performance standards, though there is currently a debate within the Equator banks about this.
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