IFC PERFORMANCE STANDARD 2LABOR & WORKING CONDITONSPRESENTION TO UNIONS, ISTANBUL APRIL 5, 2013

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PERFORMANCE STANDARDS OVERVIEW

PS1: Assessment and Management of E&S

Risks and Impacts

PS2: Labor and Working Conditions

PS3: Resource Efficiency and

Pollution Prevention

PS4: Community Health, Safety and Security

PS5: Land Acquisition and Involuntary Resettlement

PS6: Biodiversity Conservation and

Sustainable Management

of Living Natural Resources

PS7: Indigenous Peoples

PS8: Cultural Heritage

PS2:

LABOR AND WORKING CONDITIONS

ILO Conventions Child Labour Forced Labour Non-Discrimination Freedom of Association &

Collective Bargaining

SCOPE

ObjectivesFair treatment, non-discrimination, equal opportunityGood worker – management relationshipComply with national employment and labor lawsProtect workers, in particular vulnerable categoriesPromote safety and healthAvoid use of forced labor or child labor

SUMMARY OF REQUIREMENTS

1. Human Resources Policy2. Document and Communicate Working

Conditions and Terms of Employment3. Respect Collective Agreements4. Workers’ Right to Organize and Bargain

Collectively5. Non-discrimination and Equal Opportunity6. Retrenchment Plan7. Grievance Mechanism8. No use of Child Labor9. No use of Forced Labor10. Safe and healthy work environment

PS2: 2012 CLARIFICATIONS & UPDATES

Comparable conditions for migrant workersRequirements for workers’ accommodationMonitoring of conditions for workers younger <18Alternatives analysis prior to retrenchmentThird-party worker access to grievance mechanismSafety requirements for primary supply chain

(NB many of these changes were proposed by unions during consultations and adopted, in full or in part)

SUPPLY CHAINS

Triggers: Where there is:• High risk of child labor and forced labor• High risk of significant safety issues (life threatening) in the primary supply chain Requirement: Client required to introduce procedures and develop mitigation measures Implementation: Any projects with high E&S risk supply chains will be categorized ‘A’, e.g. commodity / country combinations with Biodiversity, Deforestation, Child Labor risks Examples: palm oil in Indonesia, cocoa in West Africa, cotton in Central Asia, soy/beef from Brazil (Amazon - Cerrado)

Tools: GMAP, Maplecroft

Aim: To protect workers, including vulnerable categories of workers such as children, migrant workers, workers engaged by third parties, and workers in the supply chain

CONVERGENCE OF STANDARDS

• 78 financial institutions have adopted the Equator Principles to date, incorporating application of PS 2

• EBRD’s PR 2 based on PS 2 and near identical

• MIGA and IBRD adopted IFC PSs for private sector projects, ensuring World Bank Group coherence (as lobbied for by global unions)

• OECD Export Credit Agencies benchmark against PS 2

• European Development Finance Institutions apply PSs when more than one EDFI is involved in a financing

DUE DILIGENCE PROCESS Scope of

application All FIs excluding PE funds and global trade

finance projects All direct investments excluding companies

with very low E&S and labor risks (e.g. small IT or Telecoms company)

Due-diligence Send and review a questionnaire covering PS 2 aspects

Request & review key HR policies, as required Meet with / Seek clarifications from HR

department Seek documentary evidence (e.g. sample

employment letter) Visual observation during appraisal visit (e.g.

use of PPE) May meet with staff and/or union members May request or undertake a labor audit

Addressing gaps & following up

to ensure implementation

of mitigation

Corrective Action Plan – close all gaps in reasonable time

Tie implementation to investment agreement (enforceable)

Follow-up: a) disbursement, sign-off, b) site visits and/or c) review of annual E&S / Labor monitoring reports

May request labor audit in high-risk situations

IMPLEMENTATION TOOLS Internal Resources• Internal resources: Labor Toolkit, PS 2 training for

Specialists, Labor working group (virtual)• Templates: grievance mechanism, disciplinary

practices, non-discrimination etc to assist Clients• PS 2 ‘champions’• Various sources of PS 2 info, e.g. US Dept Labor List

of Goods Produced by Child Labor or Forced Labor

External Resources – Good Practice Publications• Addressing Child Labor in the Workplace & Supply

Chain (2002)• Managing Retrenchment (2005)• Non-discrimination & Equal Opportunity (2006)• Workers’ Accommodation – Processes & Standards

(2009)• Measure & Improve Your Labor Standards

Performance: PS 2 Handbook for Labor and Working Conditions (2010)

GLOBAL IFC-UNION INTERACTION

Unions substantially involved in formulation of PS 2 in 2004-6 and again in the PS 2012 update (+ ILO)Global union review point for new E&S disclosure documents exists – union concerns over timingDedicated website for raising union concerns on proposed new investments: ~ 30 projects highlighted to dateSome union complaints directed via the Compliance Advisor Ombudsman (CAO) mechanism ESG Department representative meets 2-4 times a year, as informal contact in between on PS 2 mattersDifferences of opinion generally concern implementation of PS 2 requirements, not content

WEBSITE

REGIONAL ISSUES & CHALLENGES• 2 CAO complaints in Turkey (Assan Aluminium and

Standard Profil), both about Freedom of Association (not respecting workers’ rights to join and form unions)

• Dealing with the aftermath of the Arab Spring (multiple and ongoing strikes, union issues)

• Worker Health & Safety in many jurisdictions, e.g. in Turkey in construction

• Privatizations / retrenchment (e.g. Albania, Lebanon…)

• Least developed (IDA) countries: lack of Govt capacity, enforcement on labor, low incentives, union issues