If provided by the financial institution, the Early Warning System Team writes a short summary describing the purported development objective of the project and project components. Review the complete project documentation for a detailed description.
PROJECT DESCRIPTION
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).Urbi, Desarrollos Urbanos, S.A.B. de C.V ("Urbi" or "the Company") is a Mexican developer present in 35 cities across 20 states. The Company focuses primarily on affordable entry-level and low middle-income housing while also operating in the high-middle and upper income housing sector. The Project will establish a Supplier Finance ("SF") program and make financing available to selected suppliers of Urbi, through the discounting of receivables of the suppliers payable by Urbi. The SF program will have an IFC-funded, uncommitted credit line of US$50mn. The program will be implemented through PrimeRevenue, a Supply Chain Finance platform, and its local re-seller, E-Factor Network ("EFN"), and it is expected to reach 200 Suppliers the large majority of which will be small and medium enterprises (SMEs).
OVERVIEW OF IFC'S SCOPE OF REVIEW
In projects under the Global Trade Supplier Finance program ("GTSF"), IFC assesses environmental and social (E&S) risk at supplier level by assessing the Buyers' systems for management of E&S performance of their Suppliers.IFC's supplier due diligence is based upon IFC's review of Urbi's Corporate Social Responsibility management systems and procurement practices. IFC's due diligence involved: (i) a review of publicly available information describing Urbi's approach to suppliers including Urbi's 2010 and 2011 Corporate Responsibility Reports, Urbi's ethics code and the company's policy for selection and assessment of suppliers; (ii) a review of the internal processes and policies for the selection, assessment and accreditation of suppliers (both for materials and services); (iii) due diligence materials and the Environmental and Social Review Summary of the proposed transaction Urbi Verde I between Urbi and IFC, which is publicly available
at:http://www.ifc.org/ifcext/spiwebsite1.nsf/651aeb16abd09c1f8525797d006976ba/ade822e677b11851852579c700511939?opendocumentand (iv) a review of public information concerning labor, environmental and social conditions in Mexico and in the sectors where the potential suppliers of Urbi operate (such as construction materials and sub-contractors, providing services).
IDENTIFIED APPLICABLE PERFORMANCE STANDARDS**
While all Performance Standards are applicable to this investment, IFC's environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards.PS 1 - Assessment and Management of Environmental and Social Risks and ImpactsIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards
In this Project, potential adverse E&S impacts may arise at the level of the Suppliers. While all IFC Performance Standards are applicable to this investment, IFC's due diligence has focused on Urbi's systems for management of E&S performance of their Suppliers; therefore the investment will have impacts which must be managed in a manner consistent with the Performance Standard 1.
ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE
Suppliers under this transaction provide a variety of products and services to Urbi including construction materials (e.g. plumbing and electric fixtures, windows, appliances, etc) and specialized construction labor (e.g. electrician services, finishing services, etc). The most common E&S risks associated with these suppliers include labor management and working conditions, in particular occupational health and safety.
**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at
www.ifc.org/sustainability
ENVIRONMENTAL AND SOCIAL MITIGATION MEASURES
IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC's requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.The potential risks, where encountered, are both manageable and site specific. This is therefore considered to be an E&S Category B project.
PS 1: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS
Urbi has in place a policy for the selection and assessment of suppliers. Urbi has a well defined strategy based on risk and relevance of the suppliers. Urbi has identified three main categories of suppliers: the corporate suppliers, small and medium suppliers that have a direct impact on the product and suppliers of "non-core" goods and services.Corporate suppliers are being fully assessed in terms of corporate social responsibility via a formal questionnaire and verification process. The specific criteria included in the questionnaire are fully aligned with IFC's Performance Standards and international practices. The program is in process of implementation and is expected to cover the main corporate suppliers in the first stage. Currently almost 50% of the corporate suppliers have been fully assessed. Suppliers are classified in two categories: "approved" and "with improvement opportunities." After assessment a follow-up letter is provided to the suppliers and for those with identified improvement opportunities the letter contained guidance from Urbi's CSR team on the improvement opportunities. Currently the identified opportunities are given as recommendations and do not exclude the suppliers from doing business with Urbi.Small and medium suppliers with direct impact on the product undergo an accreditation process. Suppliers are assessed in terms of quality and overall environmental and social compliance. Urbi has an internal unit/center in charge of selection and accreditation of the suppliers, once the suppliers are qualified they are incorporated in the list of authorized suppliers. Urbi is planning to enhance the E&S criteria for these suppliers to have a more detailed assessment. The process starts with the bidding process where suppliers are assigned a score considering not only quality but also basic environmental and social criteria. Only suppliers that have been assessed and are accredited are considered a reliable source of the material, labor and services. Over time suppliers are expected to improve their initial score and agree on specific plans and targets to achieve better performance. Urbi has been recognized by the Mexican Economic Secretariat with the "Galardon Pyme" as driving company (compania tractor) for its support to enhance the competiveness and social responsibility capacity of its suppliers. Some additional details on product specification are provided in the Environmental and Social Review Summary of Urbi Verde I, referred to earlier.The E&S performance of suppliers of other products and services that are not core to the Urbi activities is currently not being assessed. Urbi will define a specific strategy in order to assess these Suppliers' E&S impact and consider good performers from these Suppliers as eligible for the proposed finance line.Urbi has in place additional controls regarding sub-contactors; specific clauses in the legal contracts require the sub-contractor to follow the local law (Ley Federal del Trabajo) in relation to labor and working conditions, protection of the health and safety of contract and sub-contract workers and indeed freedom of association. Urbi has agreed, as described under Urbi Verde I, to enhance the monitoring of occupational Health and Safety among the sub-contractors.Urbi is working on identifying and implementing a methodology to track greenhouse gas emissions from the housing projects. Urbi has implemented a program to obtain data and report on greenhouse gas emissions on the supply chain. Urbi maintains membership in various entities that have a sustainability agenda, such as the Mexican Green Building Council, the Mexican Chapter of the Association of Energy Savings in Building and they contribute to national technical committees concerned with product development, product specification and energy efficiency related to housing and materials used in housing.Urbi will continue to assess the E&S performance of the suppliers; Urbi will ensure that only suppliers that have been assessed on Environmental and Social aspects and that have achieved a sufficient score to be classified as "approved" have access to be financed through the IFC line. Urbi will establish criteria for small and medium suppliers and suppliers of "non-core" goods and services; those suppliers will be assessed and assigned a score, once the supplier demonstrate its status as an acceptable supplier, the supplier can have access to IFC's credit line. The supplier as part of the on-boarding process to PrimeRevenue will include the results of the E&S assessment performed by Urbi and as described before only "approved" suppliers will be considered for this project.As needed, corrective action or actions plans to improve supplier E&S performance will be agreed between Urbi and the supplier. It is expected that through implementation of these action plans supplier will improve E&S performance, to an extent that will be reflected in the rating, such that the supplier will be able to access the finance program. In the development of the rating systemUrbi has planned annual updates of the E&S information received from the suppliers and for the assessment of suppliers. Urbi will review the effectiveness of the program and will enhance it as appropriate in coordination with IFC.
