Rachel Kyte

As the private sector arm of the World Bank Group, the International Finance Corporation (IFC) finances private sector projects in developing countries. Often, when deciding whether or not to support a project we are confronted with the following choice:

Should we support a project that poses environmental and social risk management challenges, but which can ultimately have a real developmental impact, or should we shy away from such risk taking?

The answer lies in the quality of the project sponsor. If the client company has a senior management level and board commitment to its environmental and social responsibilities, if the company is ready to work with us to meet IFC’s environmental and social standards and even go beyond, if the company understands the long-term benefits of managing its environmental and social risks, then yes, we will invest.

For example, the IFC has invested twice in Grupo Maggi, a Brazilian soybean company, in spite of the ongoing controversy over the relationship between global soy demand, soy cultivation and deforestation. We believe that we made the right choice to work with a company in a critical global supply chain that was prepared to make important environmental and social changes to their business practices. Subsequently, Grupo Maggi has staked out a leadership position on sustainability.

Grupo Maggi
Grupo Maggi is a large soybean producer, processor, and exporter located in the western Brazilian state of Mato Grosso. Part of Grupo Maggi’s soy is bought from third-party farms. Mato Grosso is situated in the Amazon region and hosts extensive portions of “cerrado”, a savanna with a unique array of plant and animal species. When IFC first considered investing in Grupo Maggi, the company was facing a number of issues.

The location of Grupo Maggi’s operations meant that it was caught in local and international debates over the causes of Amazonian deforestation, and faced regular attacks from non-governmental organizations. The company did not have an internal system in place to effectively manage its environmental and social practices, nor did it have dedicated experts on its team in these critical areas. And it had no system to control the environmental and social impact of the production processes undertaken by third-party soy suppliers, including their treatment of workers.

Grupo Maggi viewed IFC’s involvement as an opportunity to gain the expertise needed to improve its operations. The company was determined to grasp complex environmental and social issues, to pioneer new ways of tackling the potential impacts of soy production and to set an example for the region.

Integrating an environmental and social management system…
Working hand-in-hand with IFC staff and other consultants, the company began developing a set of pragmatic environmental and social policies and procedures to be integrated in the company’s daily operations.

The first step was to create an environment and social team which could oversee the creation and implementation of the company’s new management system. The team was made responsible for the company’s compliance with waste water, air emissions, solid waste, worker exposure to harmful chemicals, work safety and hazards, and the implementation of effective training programs. The new team also developed procedures to handle issues such as agrochemicals, water use and management, land management and cultivation procedures.

The second step was to ensure that the new practices would be applied effectively throughout the company. Grupo Maggi created a comprehensive internal learning program to teach all company employees the new procedures as well as how they should be implemented into their daily work.

… including suppliers
The new environmental and social management system was extended to the 500 soybean supplying farmers. Additionally, the new environment and social team was given the responsibility of monitoring activities throughout the company’s supply chain. They organized training sessions for the supplying farmers, including on the application of environmental legislation and good practices, and developed a manual detailing the required procedures. They also conducted a baseline environmental and social audit of the suppliers.
 
Grupo Maggi added new clauses to its commercial contracts with suppliers prohibiting the use of child and forced labor, interference with indigenous peoples, and disturbance of conservation units such as parks, among many other requirements. The new contracts also require the cessation of illegal logging practices, a proactive strategy for gradual elimination of all environmental liabilities on farms and an annual environmental inspection of property.

Dialog with local NGOs

Grupo Maggi takes part in educational project at Agrishow Cerrado 2006

As part of its new approach, Grupo Maggi recognized that it was also important to establish an open dialogue with the local non-governmental organization (NGO) community. IFC facilitated an introductory forum with the company and several NGOs. And while putting its environmental and social management system in place, Grupo Maggi was able to draw on the resulting relationships and lessons learned to further strengthen its program.

Grupo Maggi is still involved with major Brazilian NGOs who are working on the dynamics of reforestation. The company collaborates closely, for example, with the Brazilian Instituto de Pesquisa Ambiental da Amazônia (IPAM). Together, they are researching the impact of fires on the “cerrado” and the best ways for restoration.

Spreading the word
Grupo Maggi is now playing a key role in the implementation of sustainable soy production practices in the region. Its employees are teaching students and industry professionals environmentally and socially sound farming practices. At the regional agricultural association’s farm fair, which draws nearly all soy growers in the state of Mato Grosso, Grupo Maggi has been leading workshops and seminars sharing their experiences with environmental and social change through business practices.

On an international scale, in 2005 the company initiated, along with WWF and other organizations, a Roundtable on Responsible Soy. The roundtable aims to develop global solutions for responsible soy production, including criteria for production and sourcing. The Roundtable was developed into an international organization in June 2006.

In conclusion
Grupo Maggi has clearly demonstrated its readiness to invest time and money in reducing its impact on the forest and the environment, as well as fair treatment of workers, including in its supply chain. Grupo Maggi could have balked at IFC’s environmental and social requirements; it could have sought financing elsewhere. But Grupo Maggi not only implemented IFC’s requirements, it went beyond to become a major proponent of responsible soy production.



Photo: Grupo Maggi website