Establishing a robust ESMS to manage the environmental and social risks

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Developing an Environmental and Social Management System (ESMS) framework helped our customer to evaluate risk, conduct due diligence and monitor their performance.

ESMS Consulting Project: Review, Due Diligence, Design & Implementation of Environmental and Social Management System

An Environmental and Social Management System (ESMS) is a set of policies, procedures, tools and internal capacity to identify and manage a financial institution’s exposure to the environmental and social risks of its clients/investees.

An ESMS helps the Financial Institutions to avoid and manage loans with potential environmental and social risks by conducting environmental and social due diligence prior to loan disbursement and adequate supervision of projects during the term of the loan agreement.

Project Location: Bangladesh

Duration of the project: 4 Months

Industry: Food Processing & Agri-business | Impact Investment | Development Financing

The food processing giant started its operation in the 1980s in Bangladesh. Over the years, the company has grown and contributed significantly to the overall socio-economic development of the country. They are one of the largest food processing/agribusiness organisations in Bangladesh.

They produce more than 200 food products under different categories i.e. Juices, Drinks, Packaged Water, Bakery, Carbonated beverages, Snacks, Confectionery & Dairy in multiple production units. These products are regularly being exported to 100+ countries of the world. The company has adopted several international standards like ISO 9001, Food Safety, HALAL etc.

The Challenge

Based on a previous independent management system assessment, the organisation has developed a corrective action plan. They implemented a number of improvements and have prepared a draft ESMS framework.

However, the challenge was to make the system robust enough to demonstrate adequate controls. This, in turn, will help to manage the financial institution’s investment risk on the environment, safety and social domain.

ESMS Consulting – How we did it

We started with the understanding of the operations, processes, management practices of the organisation. The next step was to review the existing Environmental and Social Management System framework including the E & S risk profile.

The review/due-diligence process was supplemented by the development of procedures and protocols for both corporate level as well as at the plant level. These well-documented procedures were made available to all staff with responsibilities for implementation. They are designed as a stand-alone operations manual for formal documentation of the process.

These were aligned to the overall organisational risk management objectives, with a greater purpose of supporting Sustainable Development Goals (SDG).

We supported the organisation to understand and implement the procedures with the help of several interventions including capacity development programs.

What standards and guidelines were used?

The foundation of the ESMS has been built on IFC (International Finance Corporation) Performance Standards (PS 1-8) and statutory requirements of Bangladesh. We used several tools and guidelines for ESMS issued by IFC and other development finance institutions.

We also used our knowledge and expertise on different international management system standards like ISO 14001, ISO 45001 and SA 8000.

For stakeholder engagement, we used AA 1000 SES as a guideline.

How our ESMS Consulting helped the customer?

The entire process of review, development & implementation support had helped the organisation to demonstrate their commitment to environmental and social management to their investors and other stakeholders.

Our ESMS Consulting support helped them to explain their procedures for identifying, assessing and managing environmental and social risk, defines the decision-making process, describes the roles, responsibilities and capacity needs of people for doing so and states the documentation and recordkeeping requirements.

It also provides a framework to evaluate environmental and social risk, conduct environmental and social due diligence and monitor their environmental and social performance.

It helped our customer to develop an Environmental and Social Management System with a set of policies, procedures, tools and internal capacity to identify and manage their investor’s exposure to the environmental and social risks.