Monitoring environment & social performance for a large steel plant in India
Mitigating the sustainability risk by assessing the performance of the investee on behalf of the investor
A major steel manufacturing Industry with a capacity of more than 3.00 TPA had taken a loan from a few International Banks due to its expansions plans. The banks are development agencies that provide loans provided the borrower complies to the standards based on sustainable aspects viz health & safety, environment, labour principles, cultural heritage, human resources, etc. The investor thus ensures that the investee doesn’t violate the legal requirements as well as carry out its operations without adversely affecting the environment & the community. To ensure that the requirements are complied with, the investor adopts certain mechanism like independent third party annual audits, performance monitoring, gap assessment, etc and thus measure the compliance level based on outcome of these activities.
The investee, in this case, had acquired land from the surrounding villages to expand its steel plant and hence, there were issues of resettlement & rehabilitation as per the legal requirement, compensation & its disbursement, grievance mechanism, CSR & other related community issues.
Being a steel Industry, one of the critical areas that required attention was the health & safety of the workers both permanent & the contractors.
Environmental & social performance is one of the major criteria for sustainable performance for any manufacturing industry & it was so in this case too.
The challenge was to gain the trust & confidence of both the investor & the investee so that the assessment could be carried out without any biased approach & present a factual situation to the investor.
What we did
We took up the challenge of conducting the performance study of the investee on environment & social performance issues, finding the gaps in the compliance level, measuring the compliance level & preparing an action plan based on the same.
The first & foremost step was to carefully study the requirements i.e. Terms of Reference given by the investors. Since the requirements also included compliance to legal requirements for each aspect, we identified all the statutory requirements and prepared a checklist for the same as well as for the standards.
A detailed gap assessment was carried out by a team of experts in Health & Safety, Environment, Social, Community, Resettlement & Rehabilitation, Human Resources etc. The site visit in the plant comprised of visit to the production area i.e. blast furnace, DRI, coke oven, sinter plant, steel melting shop, CSP, CRM, WRM, maintenance, service areas, coal washery, etc.
The team made an extensive assessment of the Health & Safety as well as those of the environment through the plant visit, interviews, discussions with respective Dept. Heads & review of documents.
The performance of social aspects were measured through visit to the PDF (Project Displaced Families) colonies, assessment of implementation of the R & R activities as per the plan, review of the disbursement of the entitlements & other benefits as per the R & R plan.
The visits were also made to the various CSR projects to verify the implementation of the same as per the CSR plan & budget.
A detailed verification of the grievance mechanism, stakeholder engagement & human resource processes was carried out by the team through interviews & document review.
The assessments thus lead to identification of gaps in the system, assessing the risks due to the same & identifying the corrective action plan to mitigate the same. The investee was informed of the performance through submission of a final report.
The Environment & Social performance monitoring proved to be beneficial for both the investor & the investee. The organisation was able to identify its E & S compliance issues which otherwise could have created a risk to the company at any stage in future. Thus, a timely closure of the gaps helped them save time & money and gain the confidence of its stakeholders, particularly, the investors.
By getting a factual situation of compliance level of the company, the investor became aware of the risks, thus, could take its business decisions based on the same. Through the corrective action plan & its closure at a later stage, the investor was assured of the sustainability of the investee as well as prevents any risks that could have harmed its brand image & reputation.