OVERVIEW OF IFC'S SCOPE OF REVIEW Many apparel and footwear brands and retailers, recognizing reputational risk to their own brands from potential supply chain exposure to issues have taken measures designed to ensure equitable working conditions and responsible environmental and social performance among their supply chains. In addition many of the brands active in this sector publish information describing their management systems and processes used to develop the necessary assurance of good environmental and social performance among their Suppliers, usually as a component of the company's approach to Corporate Social Responsibility (CSR).The branded companies that will be proposed as Buyers in this supplier finance structure are expected to have supply chain assurance processes as described above, and therefore it is expected that their Suppliers in this structure will have satisfactory E&S practices. IFC's supplier due diligence will be based upon IFC's review of the Buyers' CSR management systems and procurement practices, in the manner described below. PROJECT DESCRIPTION The transaction involves IFC support to clients of TradeCard, ("TC" or the "Platform"). TC is asupply chain collaboration, trade finance and vendor compliance electronic automated platform connecting branded Buyers, Suppliers and service providers.This project is proposed under the Global Trade Supplier Finance program ("GTSF" or the "Program") approved by the IFC Board in September 2010. (Original Project Link #28723). Under GTSF, IFC will provide short-term financing to Suppliers ("Suppliers") in emerging markets selling to large companies ("Buyers") on open account terms. The total GTSF program size is $500 million and this proposed project under the Program involves revolving short-term working capital finance to Suppliers to globally known, branded apparel and footwear Buyers that are clients of TC. Financing would be disbursed to eligible Suppliers after acceptance of the Buyer, through the TC platform, to pay on the due date, for goods or services supplied. The project therefore will increase access to finance for these Suppliers and facilitate immediate improvement in cash flow rather than await payment from the Buyer several weeks later. The Program seeks to enhance the availability of such supplier finance solutions in emerging markets, particularly for small and medium size enterprises Suppliers supplying to large international Buyers.In the first phase of the project with TC, IFC expects to support over 200 Suppliers in countries such as Bangladesh, Indonesia, India, Peru, Pakistan, Sri Lanka, Egypt, Jordan and Philippines. IDENTIFIED APPLICABLE PERFORMANCE STANDARDS In this Project, potential adverse E&S impacts arise at the level of the Suppliers. While all Performance Standards are applicable to this investment, IFC's due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:PS1 Social and Environmental Assessment and Management Systems;PS2 Labor and Working Conditions;PS3 Pollution Prevention and Abatement.The apparel and footwear Supplier companies are likely to be long-established, manufacturing companies, usually in assigned industrial locations, therefore issues related to other performance standards are unlikely to be encountered ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE The most common E&S risks associated with the apparel and shoe manufacturing sector relate to poor working conditions, and can involve failure to inform workers of their rights, compulsory overtime requirements, failure to record and compensate for time worked correctly, excessive working hours, suppression of freedom of association, low wages, child or forced labor and discriminatory employment practices. Workplaces can on occasion be excessively hot and can present other hazards to worker health and safety. Potential adverse environmental impacts can arise from failure of adequate treatment for process or sanitary waste effluents.These issues are readily manageable and site specific: this is therefore considered to be an E&S Category B project KEY ENVIRONMENTAL AND SOCIAL ISSUES AND MITIGATION IFC's review of each Buyer's Procurement and CSR systems will be based initially on publicly available information and will focus on the Buyer's supply chain risk management processes and the scope to determine and manage supplier E&S performance. In particular, IFC will review the Buyer's systems against the requirements of the Performance Standards and will seek to understand a Buyer's E&S performance rating methodology and criteria for supplier performance. Where public information is insufficient or unclear, IFC will engage with TC to seek information from the Buyer to address additional inquiries and supplement information. Finally, IFC will seek supplier representation on key issues not covered by the Buyers management systems. As an example, Suppliers may also be required to represent that they have no ongoing land related disputes with respect to the land on which they have operations, because Buyer CSR systems do not typically address this issue.IFC will only work with Buyers with well established supplier verification systems, including auditing programs to manage E&S performance in the supply chain in order to assure itself of supplier compliance with the Performance Standards. IFC will also explore opportunities to work with Buyers to enhance their E&S risk management processes for Suppliers and to make more efficient use of energy and water.Key findings from a preliminary assessment of some Buyers indicate that most Buyers follow similar supplier evaluation practices including providing guiding performance principles to Suppliers, usually defined as Codes of Conduct. Some Buyers also provide technical guidance on issues such as effluent treatments or how to reduce energy and water used in manufacturing. Buyers allocate substantial human and financial resources to ensure compliance with and implementation of the Codes of Conduct. Some Buyers insist on CSR audits before initiating business with a new supplier facility, others do not. Further, implementation and enforcement of the Buyer Code is conducted both by internal and external auditors and typically the supplier performance is reflected through a rating framework that scores performance and compliance with the Buyer Code. Buyers have processes to follow-up on the findings of their audits and have remediation mechanisms in place including action plans, and Buyers will suspend or sever relationships with Suppliers who do not implement action plans satisfactorily or who are found to have egregious breaches of the Buyer requirements. Several Buyers are starting to include environmental elements in addition to labor aspects in their codes and collaboration between Buyers and other stakeholders has resulted in capacity building for the Suppliers, including shared trainings and audits in factories used by multiple Buyers.Social and Environmental Assessment and Management SystemsIFC's review of each Buyer's systems will determine the extent to which the Buyer's CSR systems can be used to determine Performance Standards compliance in the Supplier. The review will therefore cover the design of the Buyer's CSR evaluation system (e.g.: what parameters are assessed, frequency of assessment, what rating is given to each, how are Suppliers categorized in CSR terms), the Buyer's organizational structure and capacity systematically to apply the CSR system and the details and characteristics of the Buyer's supplier base. The review will also include consideration of the Buyer's Code of Conduct and supplier guidance, the scope of the Buyer's legal compliance review, details of the Buyer's supplier sourcing, certification and compliance programs and rating methodology for Suppliers and details of the Buyer's auditing methodology including frequency and type of audits, consistency across regions and use of third party auditors.The review will focus on the details of the Buyer's compliance framework to work with Suppliers in violation of the Buyer's policies and the Buyer's use of Action Plans to track supplier compliance. This will include details of the Buyer's tracking systems including information tracked such as lost time injury frequency rate, workplace air quality, overtime hours, number of employee grievances and details of the Buyer's reporting methodology for Suppliers. The review will also consider the environmental requirements placed on Suppliers including managing liquid effluents, use of resources, waste generation and waste management, policies on the use of chemicals and list of exclusionsThe Buyer's use of environmental and social codes/programs and participation in third party initiatives for the apparel industry such as Better Work, Fair Labor Association, Global Social Compliance Program and Safework will also be considered including the Buyer's capacity development initiatives to support Suppliers.Details of the Buyer's external grievance mechanism to address concerns related with E&S elements in the supply chain, including the Buyer's grievance mechanism to cover employees of the Suppliers and details of the Buyer's procedures to respond to external communications, negative press coverage and queries for operations of the Suppliers will also be considered.Supplier requirementsMost Buyers categorize Supplier performance on a sliding scale (e.g. A to D or 1 to 4). Where applicable, Suppliers will be required to represent to IFC the status of their current rating with respect to the specific Buyer's rating system and provide a copy of the most recent action plan received from the Buyer to ensure these Suppliers are eligible for IFC finance. Only Suppliers evaluated and categorized satisfactory by the Buyer's E&S rating methodology will be eligible for IFC finance.If IFC's evaluation of the Buyer's CSR systems identifies a small number of gaps between these systems and Performance Standards considerations, then Suppliers will also be required to make representations in these areas. For example, most Buyer CSR systems do not consider land acquisition, therefore Suppliers may be required to represent that they have no ongoing land related disputes with respect to the land on which they have operations.

ACCOUNTABILITY MECHANISM OF IFC The Compliance Advisor Ombudsman (CAO) is the independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an IFC or MIGA- financed project. If you submit a complaint to the CAO, they may assist you in resolving a dispute with the company and/or investigate to assess whether the IFC is following its own policies and procedures for preventing harm to people or the environment. If you want to submit a complaint electronically, you can email the CAO at CAO@worldbankgroup.org. You can learn more about the CAO and how to file a complaint at http://www.cao-ombudsman.org/