India / Tata Tea-01/CAO Vice President Request
This case relates to labor related aspects of IFC's investment in Amalgamated Plantations Private Limited (APPL), a company which manages tea plantations in the Northeast India. APPL is the second largest producer and supplier of tea in India and employees over 30,000 people on its 25 tea estates in Assam and West Bengal.
IFC’s equity investment was designed to support the implementation of a sustainable employee-owned plantation model. Employees were provided the opportunity to purchase shares in APPL. As part of the investment, IFC was required to assure itself that its client operated in accordance with IFC’s Performance Standards on Environmental and Social Sustainability.
The compliance appraisal of IFC's investment in APPL was initiated by the CAO Vice President in May 2012 based on unresolved concerns submitted by the International Union of Food Workers (IUF) to IFC's Communication Portal for Performance Standard 2 (PS2). Concerns in relation to the investment were triggered by incidents on two APPL plantations in 2009/10 which led to disputes with unions representing APPL workers.
After completing a compliance appraisal in January 2013, CAO concluded that the issues warranted further investigation. In February 2013, CAO received a complaint from three NGOs on behalf of tea workers working and living in the company’s tea plantations. The complaint raises concerns about labor and working conditions at three different plantations, specifically citing long working hours, unpaid compensation, poor hygiene and health conditions, and a lack of freedom to associate among plantation workers. Furthermore, the complainants question the worker share-buying program, contending workers have been pressured into buying shares, often without proper information about the risks of such an investment. This complaint was transferred to the compliance function in November 2013. A compliance appraisal in regard to the complaint was finalized in February 2014 with a decision that the issues raised in the complaint merited further investigation. At this point, CAO decided to combine the complaint-triggered compliance process with the earlier CAO VP–triggered compliance process.
CAO’s investigation report was released in November 2016.
While noting that IFC’s investment in the company had potential for significant development impact, CAO’s investigation identifies a number of non-compliances related to IFC’s assessment and management of environmental and social (E&S) risk associated with the investment.
Given the vulnerable status of workers and the client’s responsibility to provide a range of basic services to workers, CAO finds that IFC’s pre-investment E&S review of the investment was not commensurate to risk. Shortcomings in this review, led to the development of mitigation measures which were insufficiently detailed and did not address key risk areas. During supervision, CAO found that IFC did not assure itself of compliance with its Performance Standards. As a result, E&S compliance issues raised by the complainants remain unaddressed.
CAO’s investigation makes a number of specific non-compliance findings in relation to IFC’s assessment and supervision of living and working conditions on the plantations, reported use of banned pesticides, information disclosure, consultation and response to security incidents.
IFC has released a public response to CAO’s investigation report. CAO will monitor IFC’s actions in response to the investigation findings and will issue a monitoring report within a year.
Status as of November 07, 2016
- Project Name & Number
- Tata Tea 25074
- Amalgamated Plantations Private Limited (APPL)
- South Asia
- Environmental Category
- $7.87m Equity
- Under Appraisal: Completed
- Under Audit: Completed
- Monitoring: In Process