ESG in Practice: Tools for Portfolio Companies in Emerging Markets

How do we ensure that our portfolio companies meet the highest standards in environmental protection and social responsibility while remaining operationally efficient and resilient?

Join us for an in-depth look at our newly developed ESG Operational Toolkit: a practical, field-tested resource designed to help our portfolio companies strengthen practices across HR, health & safety, and environmental management.

In this session, we’ll move beyond theory to explore how the toolkit is being used in practice. Hear from portfolio company FarMart about their experience implementing the framework, including the steps they took to address operational interruptions, engage stakeholders, and improve efficiency.

Access the responsAbility ESMS toolkit: https://www.responsability.com/en/esms-toolkit

Panelists:
Louise Corbett, ESG Specialist, responsAbility Investments AG

Tannya Garg, Head of Sustainability, FarMart

Hosted by:
Robert Widén, Director Nordics, responsAbility Investments AG

Follow responsAbility on LinkedIn: https://www.linkedin.com/company/responsability-investments

Transcript

0:01

Welcome to Voices of Impact Investing, the responsAbility Investments podcast. In this episode, ESG in Practice Tools for Portfolio Companies in Emerging Markets, We explore how responsAbility's new ESG operational toolkit helps companies strengthen standards while staying resilient and efficient. Together with Tannya Garg, Head of Sustainability at FarMart, and Louise Corbett, ESG Specialist at responsAbility, we take a closer look at how the toolkit is used in practice. The conversation is moderated by Robert Widén, Director Nordics at responsAbility. It's not news to anyone by now that ESG factors are embedded into investments in some way or another. In fact, most investors require it nowadays. However, measuring and implementing them in practice, especially in emerging markets, can be challenging. And today we'll learn how responsAbility's newly developed ESG operational toolkit empowers portfolio companies to meet the highest standards in environmental and social responsibility and while staying efficient and resilient. Now to help us understand this new toolkit, we will hear real world insights from Tannya Garg, Head of Sustainability at the agritech company FarMart and find out how they have gone about implementing this toolkit. Tannya, we're so glad to have you with us today. Thanks a lot, Robert. Very happy to be here. Thank you, Tannya, and I'm looking forward to hear more about FarMart and your story soon. But before I hand it over to you, Tannya, I would like to introduce responsAbility's very own Louise Corbett, one of the leading ESG experts at responsAbility. Thanks, Robert. I'm excited to share this tool that long last we've been developing it for a while. I'm glad to hear that. And and now that I've I know what I've understood is that you've played a key role in the creation of this toolkit. So I think it's, it's only fair that you get to set the scene and, and tell us what this toolkit is all about. So essentially it's a template for an environmental social management system, or what we call an ESMS. It's, it's a system to help manage environmental and social risks. So companies might be more familiar with like a quality management system. This is the same, but for ENS and what is covered by the ENS, the environmental and social. I think environmental is commonly understood by diversity, water resources, The the S sometimes is a little misunderstood. It does include HR practices, human resources, labour practices, community engagement. It's not really corporate social investment, though that could be included. Yeah, that's typically not included. And this, this tool is essentially a template for policies and procedures related to environmental social risks. And it's, it's a number of documents that you can use yourself to improve your ENS management. And what I would find interesting, I mean, is to dig a bit deeper into the back story. I mean, why was it developed? Sure. So responsAbility often invests in growing and expanding companies. So they're there earlier on in the growth phases. And so they might not have environmental social management systems in place. In fact, most probably don't. And so we often are requiring this of our investees to develop these systems. And some of those do have the systems in place, but we might see gaps that we want them to address. And so this, this was developed for them. So about 3 years ago, I was helping a colleague review an ESMS for one of his deals. And I got about 20 pages in into this ESMS and I just found it quite confusing. And I thought, well, I'm an expert and I'm finding this confusing. How are the staff going to implement those? And so is that that point that I had this thought that hey, why don't we develop a template that we can provide to people because we're asking it so often. So that would help, you know, try keep it distinct, brief and to the point. And you know, that would help all of us. We have a technical advisory facility. So they agreed to fund it. This was supported by the governments of Canada and Germany, amongst others. And once we got the funding approved, we appointed an external consultant, SLR Consulting, to compile this ESMS template for us for small and medium sized agricultural companies. I'm sure a lot of companies are happy that it now exists. Thank you for for setting the scene. And Louise, a great story. And Speaking of companies, I think it's time to bring in Tannya. I'm curious, what is your connection with this toolkit? Yeah, sure. Thanks, Robert. So I'm representing FarMart here. FarMart is about a 10 year old food tech company based in India. We essentially use tech to optimize the food supply chain. We have local aggregation networks across the country and we help about four and a half million farmers sell their produce to businesses across the globe today. We got introduced to responsibility about two years ago when they invested in US and that's part of that process. They actually did an entire ESG risk assessment for us and, and help us come up with an action plan on how do we mitigate the risks that were identified as part of this action plan. There were a number of policies and procedures and an overall comprehensive ESMS that we had to come up with. And we've been working closely with responsAbility on actually building out all of those things. Now I think about 6 to 8 months back, Louise told us that they're developing a toolkit actually that will help us to this job a lot easier, a lot quicker. And they asked us to test it out. So we agreed to do this. That if we follow up on that, I mean, how have you used the template so far? Yeah. So as part of this action plan that we developed, there was of course the overall ESMS, but about 20 to 30 policies, procedures under that right to cover the various risks that we were facing. While some of them we had already worked on, there was still a lot more that needed to be developed. So we, once we got access to this toolkit, we started using each template to actually build out our policies. So far with built around 10 new policies using the templates that were a part of the tools gate. So we found it pretty easy to use, pretty comprehensive. So each policy comes as a Word document, which has which lists out an overview of what the policy should contain, what other different sections we should be covering guidance notes around how do we actually think about, you know, how to adapt those different sections to our particular context. So, so there were some things that we added to adapt it to our national context, our national laws that we need to adhere to, some things we removed that were not relevant to us. But through that process, we've built around 10 new policies in the company. We also used it to actually revise some of our old policies, the ones that existing ones that we had actually started comparing them to the template to see if there's anything new we could add to our policies to make them more comprehensive. To me, it sounds like it's been very helpful for you, Tannya and FarMart for that matter. Some listeners might be thinking there is no size fits all and how I mean, how would I be sure that it works for us? So, I mean, before I go back to you, Tannya, Louise, could you perhaps elaborate on on on what Tannya a bit touched on how companies go could go about customizing and using this tool? Yeah, I think that's exactly right. We tried to make it a one size fits most that even most will have to do adapt it. So it doesn't even if you're not agricultural company, you could potentially use this. So some of them are pretty standard, like a grievance mechanism, complaints mechanism, you know, then you every company basically needs that. So you could adapt it to your policies and practices internally already. So the, as Tannya was saying, there's templates, there's 20 to well, there's 30 documents. So most companies won't need all 50 documents. Just to just to highlight that Tanya certainly farmer does not need all 50. So there's example text as Tanya mentioned that you can add, amend, remove. You really have to make it applicable to you to make it work. And you also need to assess which policies and procedures you need. And so you should do that on a risk based approach. So you need to identify what risk, ENS risk that you, your company has and then then you would have to use the policy for that. So for instance, one of them is like an integrated pesticide management plan. Now farmat doesn't actually work directly with producers and they don't produce anything themselves from farms. So they're not going to use the integrated pesticide management plan, for instance. So you really got to pick and choose what works for you. And sometimes you might just need one or two documents. Right. So you can really, really do that. Yeah. So it's fair to say that the tool offers flexibility in that matter. Yeah. Yeah. Now that we've established that you've chosen one of these or established these policies and procedures, how do you implement this or, or let me rephrase, how did you communicate it to your staff and, and train them to use it? Yeah. I mean, that's the tougher part, right? We have all these documents to fill now, but the real work comes when we try to actually implement them on ground. It's always been a challenge. I think one of the things we found really helpful while we were developing these policies, one of the approaches we took was just to make it a collaborative approach, right? So instead of just building a document on our own and then taking it to the relevant stakeholders and asking them to implement it, we invited them to be a part of actually building out the policies. So we've made a lot of focus groups where we had discussions around, took inputs from different stakeholders on what do they think is the best approach on drafting this policy, what will be feasible to implement and what will not be. And that approach has really helped us because at the end of the process we had something that we have built together and we didn't have to go tell anyone to actually implement it. It was a document everyone was proud of and, you know, felt a part of. And so that's something that's really worked for us. One other thing that we implemented, something very interested, interesting was that a lot of times these policies, you know, they need regular training, of course, through larger organization. It needs to be communicated either yearly or twice a year. Also some of the policies. So it ends up being a lot of like training after training. And I think every employee goes through that where you watch this, this list of trainees of people who, and there's very little you actually register from those trainings. So what we wanted to do was try a different approach again. And we ended up hosting this Human Rights month. So the past July we celebrated Human Rights Month in our company where we made it a whole event. So it was not just one training, it was a whole. We blew it out of proportion and celebrated it for a month where we held different events across the month. So we held quizzes, we held like games and we really engaged people into the conversation of why human rights matter. You know, what are the different data points we need to be aware of, especially in our industry? How do we identify risks? So I think it was an experiment, but it about so beautifully. We really saw a lot of engagement from the employees. And so it's something we're gonna try a lot more now. I think that is a really good example. Thank you, Tannya. And I mean, you've, you've already touched a bit on this, but if if you could elaborate on, I mean, where, where did this tool help you? I mean, if you're more particular. Yep, sure. So I think one of the biggest advantages we saw using the toolkit developed by responsAbility was just still the major saving in the time and effort we were putting into actually developing the documents and compiling the policies. So before we had the toolkit, for example, if you had to build out a new policy from scratch, we would actually try to look for templates online from other companies, you know, that we could copy or we could just adapt to our contact. But it, it would always be a tough challenge. So we would spend about one to two weeks just coming up with one single policy. Even then, we would not have full confidence on have we made a comprehensive one? Have we thought everything through? And, and with the two. And then I would tell you, you're missing something. A number of years. How long? I mean, just how long would that take? I mean, if we would say a number? I would say at least two weeks because as like, Louise is someone giving inputs, our leadership again is looking into it and giving inputs and maybe just to just to fill out the document, two or three pages, on a Word doc itself would take time. And with the toolkit that became a lot more easier because we did not have to start from a blank page and start writing something from the first word. We have this template and we have a way, a structured way of thinking about the policy, right? So it was a lot more easier for us to just then see what do we need? What do we not need? What fits and how do we fit it to our particular context and and the time definitely came down to about two to three days to actually compile it. And we know that she's already happy with it because what is given certificate and it's not just Louise actually or responsAbility. What we saw was that because the toolkit is developed to be in compliance with the IFC performance standards, it's something that's at an international acceptability level to almost every new investor also we're speaking to today, right? So every investor of course has their own assessment and their own requirements on the ESG front. But with this toolkit today, we are confident that we have policies that sort of comply with all of those requirements. And we have actually had conversations with a lot of new incoming investors where it's been such a smooth ride because we've been able to build such comprehensive policies. We have, we have reduced our due diligence times overall talking to new investors massively. So that's been like an overall big advantage. I mean, it really sounds like a like a game changer for you in that sense. Yeah, it sounds like I did what I said out to do. Sorry, Louise for keeping you sidelined, but I mean it was interesting to hear Tannya's story and Farmer for that matter. But we before we go to the Q and A and now that the listeners are experts on ESMS and all other acronyms there is perhaps we can finish off this conversation where we we started today on why ESMS is needed. I mean, what what are the benefits companies can realize by implementing an ESMS? Yeah, I think it's something we always require apart from it being required in terms of IFC performance standards. But it's a system. So if your staff change, there's turnover, it's going to help you manage the, you know, the continuity in addressing ENS risks, environmental social risks. So it really improves your sustainability in your environmental social performances. You can often have cost savings through like resource efficiency. So managing your water and energy costs better raw material for instance. So that that's also financial benefits of obviously also benefits to the environment, of course. And one of the things you might not realize when you have an effect of ESMS in place that's being used and implemented is that you might not actually realize what risks you're avoiding because you don't see them because they avoided. So you don't quite realize how successful it is and how much it might be adding to your business to, for instance, avoid labor strikes or chemical spills that you then have to pay to fix. So. So it's kind of funny that you don't see those things, but, you know, that is the real benefit of it. Yeah. So I guess this toolkit really just takes down the hurdles and makes more companies use an ESMS template. Yeah. It just makes everyone's roles clear. And so, you know, and that way you don't miss things and, you're forced to sit there and identify these risks and think about them much. People often do that for occupational health and safety risks. So this is just requiring you to do the same for environmental and social. Yeah. Excellent. Now, Louise, for anyone in the audience thinking I need this in my life, how can they get their hands on this toolkit? I mean, is there is there a secret handshake or you know what? Yeah, yeah. I get it. No, there will be a URL now in the chats and there will be a QR code in the recording of this webinar. So anyone can access it on our website then by all those means. Perfect. I think, we'll make sure to post it on LinkedIn as well so everyone can get access to it. On that note, I think we finished that conversation here and head over to the the Q and A part and I see that there are quite a lot of questions that have come up, and let's see, I think this would be a good one to start with. If I need support and how to use this toolkit, where do I go? I think this makes sense for you to answer, Louise. Yeah. So I think not all companies will have the in-house skills to use this like FarMart has done. In that case, we would recommend that you appoint or you approach either a legal professional or an environmental social professional, depending what section you need some help with. But you know, appoint someone in your country that can help you and is an expert in these matters. Yeah, OK. And there's another one follow up here is the, I mean, I guess this is relevant as well. Is it only available in English, the template? We also have a Spanish version. Let's see, we have another question here. The toolkit doesn't do everything. What did FarMart still have to do on their own? So this is for you, Tannya. Yeah, absolutely. The toolkit doesn't do everything. The toolkit basically gives us guidance and structured thinking around how do we draft our policies. But there's so much more that needs to be done, right. So starting from just doing a risk assessment to understand first what fits you and what does. And in terms of what policies do you even need to build, as Louise also mentioned is the very first. Yeah. So there, there is a risk assessment template to use. So this is what Tannya is talking about. Yeah, that is that as well. But I think that it's one of the key things to undertake as a company to really understand. What are the risks you're trying to cover? What are the risks applicable to you? And then accordingly, actually utilizing the toolkit to build out those policies and procedures. Once you have the policies also, there's a whole other task to actually get all of the internal, external stakeholders on the same page with agreeing to the policy, implementing the policy, actually monitoring the policy, doing a continuous review and revising it whenever required. So of course the toolkit helps make our job easier than just writing the document and thinking about it. But but there's everything else around it just needs to be done by the company. Yeah. So, to add to that, I think, you know, there are templates there like registers of things that you would use to help implement it, but you actually need to it's, it's a blank template, right? So you actually still need to fill it in as the company. And I think what FarMart also did nicely, you know, Tannya talks about there being internal stakeholders on discussing it with them. I think, you know, really having, it's sometimes a bit tricky having those conversations and some people don't see the value of this and you need to convince them. And I think that's really good because you really then customize it and make it work for you. So, yeah, you've got to discuss it and debate it to get it right for your company. Yeah, good. I have another question in terms of this toolkit. I mean, companies will grow, they will change. And I mean, would the ESMS stay the same? Yeah, I think that's a good question. Was that a tough question? No, I think that's right. So the ESMS, it does have like a inbuilt monitoring and review. So you should be checking it every year, you should be checking that you're implementing it. But equally your company is going to grow and expand. FarMart or so, expanding a new business line and those bring new risks. So then you would have to reassess your risk assessment and you know, you might need more management plans or you might need to add to an existing one that you've developed. And there might be a point where, for instance, you might want to get ISO certification for your management system, at which case, there might be changes required. So generally I think as companies grow, we would see their systems grow with them. And so they become more complicated, right? So you would probably end up the same with your ESMS. So this is really like, as we said for small and medium sized companies or companies just starting out in this. IFC actually has a tool, a toolkit to actually see how far along you are in that, in your ENS risk management. And that's linked in some of the templates that we've provided. So you would also be able to check what you're doing and where you want to head to. You know, you might improve. Tannya, maybe we have two more questions we can take, but this one's to you. Have you discussed this toolkit with other companies? I mean, I have mentioned the fact that we are experimenting with this toolkit and giving feedback responsAbility right now with other peers and other companies and have highly recommended it to others to try it out as well as as soon as they can get their hands on it. But I think this is the first time responsAbility is putting it out for the world to use. So yeah, it'd be great to actually discuss when more and more companies adapt it. And a follow up questions here before we we wrap up this this session, or conversation. Once developed, how much training did you have to do on ESMS? Mean, I guess you're, you're quite professional already, but I mean, this question is more especially to get buy in from management. I guess this is a company which is looking to convince their management that we should do this. Do you have any tips? Yeah, I think one of the big tips again would be to just make people part of the process. I think that's something that's worked for us and that really works. Of course this country will training that's required, but leadership and management buy in is one of the key things that would decide whether your ESMS is a success or not, right. So that's one of the key things that needs to be factored in even before you're making an ESMS because the leadership is not seeing value in it. Then it's just a peace of document and you're not really able to implement it, you know, So it really helps to have an open conversation. That's why the risk assessment is very important because of the leadership can see the risks that you have identified and how the ESMS is actually benefiting. I think everyone wants to then work towards it. Louise, I mean, you being the one of the masterminds of this toolkit, where do you see, what do you see as the end goal of this toolkit? I think for companies using it, they'll be more investable. So Tannya mentioned, it's being much easier when investors come in, but also ultimately you're making your company more sustainable and more resilient. And I think the world needs more companies like that. So go for it! I think that's a great way to end today's conversation. I would really like to thank the both of you, Tanya and Louise, it's truly been a pleasure. Thank you very much. As a leading impact asset manager, responsAbility specialises in private market investments across three core themes, financial inclusion, climate finance and sustainable food. Don't forget to subscribe to the Voices of Impact Investing Podcast to stay updated on new episodes available on Apple Podcasts and Spotify, and follow us on LinkedIn at responsAbility Investments, you'll find a link in our show notes. The Voices of Impact Investing Podcast is provided by responsAbility Investments, a licensed and supervised manager of collective investment schemes. 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