Labour Issues and EBRD

1
Labour Issues and EBRD

• Alke Schmidt
• Environment Department, EBRD

2
EBRD

• AAA-rated international financial institution
  founded in 1991
• Mandate facilitate the transition to market
  economies in CEE/ CIS
• Capital base of 20 billion
• Largest single investor in the region
• Project finance
• Over 70 private sector/privatisation projects
• Sound banking principles

3
A strong mandate in EBRDs Founding Agreement

• Requires a commitment from EBRD members to
  respect human rights as a condition of membership
  and borrowing
• EBRD to promote sustainable development in the
  full range of its activities
• EBRD to foster productive investmentthereby
  assisting in making a competitive environment and
  raising productivity, the standard of living and
  conditions of labour.

4
Operationalising the mandate Policy/Portfolio
level

• Countries human rights record assessed annually
  in country strategies. Lending may be restricted
  or suspended if lack of progress
• Assessment criteria explicitly include
• Right to form trade unions and to strike
• Rights of ethnic minorities
• (cf Political Mandate Papers, 1991/93)

5
Operationalising the mandate Project level

• EBRD Environmental Policy (2003) covers
• Ecological issues
• Worker protection issues
• Occupational health and safety
• Child labour, forced labour, non-discrimination
• Community issues

6
How does EBRD assess labour issues?

• Process managed by Environment Department (ED)
• Integrated into EDs due diligence
• Risk-based, iterative procedure
• Screen all projects (risk assessment)
• Due diligence may include questionnaires or site
  visits by ED / consultants
• Focus resources on high risk projects
• Process developed in consultation with other
  IFIs, ILO, experts

7
Labour standards risk assessment

• Credit risk (fines, loss of markets,
  productivity)
• Reputational risk
• Risk indicators
• Country
• Industry / sector
• Client policies / compliance record / reputation
• Employment impact of EBRD financing

8
Benchmarks

• All projects must meet
• National laws
• ILO conventions on child labour, forced labour,
  discrimination
• Additional benchmarks are
• EU (re discrimination)
• For remediation private sector good practice

9
What if there is a problem?

• Key is to move towards compliance
• i.e. reject financing only in extreme cases
• Action plan to achieve compliance with national
  law / ILO standards within a reasonable time
  frame
• Often changes in clients HR policies required
• Enforcement agencies may impose corrective action
  plan
• Client reporting on action plan implementation

10
Legal documentation

• All projects Covenant on compliance with
  national labour laws and ILO standards in
  template legal documents
• Covenant on Action Plan implementation if
  required
• Reporting on covenant labour compliance/action
  plan implementation as part of annual reporting
  on environmental and social matters

11
Monitoring

• Client reporting
• Monitoring visits by EBRD staff and/or labour
  experts
• Third party audits
• Role of NGOs/media

12
Resources and support

• 1 ED staff, plus labour expert consultants on
  retainer
• All ED environmental staff trained on labour
  issues and risk assessment
• Basic training for bankers on labour issues
• Country fact sheets, sample questionnaires, case
  book on project work
• N.B. This takes time!

13
Main issues to date

• Regulatory compliance
• Work hours /overtime in supermarket chain
• Retrenchment in privatisation/restructuring
• Exploitation of migrant workers in construction
• Endemic problems in country/region
• Supply chain issues
• Child/forced labour in cotton supply chain in
  Central Asia

14
Outlook

• Revision of Environmental Policy in 2006 offers
  opportunity to broaden scope and weight of social
  assessment
• Need to clarify supply chain requirements
• Process of continuous learning and improvement
• Share experiences with others

15
Labour Issues and EBRD

• Alke Schmidt
• Environment Department, EBRD