The economic and health crisis that we are facing has highlighted the need to strengthen accountability and socio-environmental performance. Currently, there are countless internationally recognized environmental and social codes, standards and good practices that define the rules and objectives to which we must aim. However, the challenge is in their implementation. An Environmental and Social Management System (ESMS) helps organizations incorporate social and environmental objectives into their projects through a set of clearly defined and replicable processes.
The ESMS is a tool that has historically been very successful in the private sector. Can we apply an ESMS to the public sector to improve socio-environmental performance? Yes, and it doesn’t have to be complex or expensive. In reality, many of its elements already exist and would only need to be organized in a comprehensive way in projects to enable adaptive management during the execution stage, thus achieving an improvement in socio-environmental performance and adding value to organization’s reputation.
ESMS, a necessary component in IDB projects
In order to promote adequate socio-environmental performance in the projects we finance, under the IDB’s new Environmental and Social Policy Framework, we require that our borrowers have an adequate ESMS that is consistent with the project’s level of risk and impact, in accordance with the requirements established in the Environmental and Social Performance Standard 1 (ESPS 1).
ESPS 1 requires borrowers to prepare a project-specific ESMS with a methodological approach that ensures the management of environmental and social risks and impacts is carried out in a structured, systematic, and ongoing manner. An effective ESMS is a dynamic and ongoing process that is implemented and supported by the borrower, involving collaboration between the borrower, their workers, contractors, suppliers, and other stakeholders. In addition, an adequate ESMS is aligned with the scale and nature of the projects and promotes solid and sustainable environmental and social performance, with better financial, environmental and social results.
Seven key elements of an ESMS
To do this, it is key for the ESMS to incorporate the following seven elements, as defined by ESPS 1:
- Project-specific environmental and social framework, which establishes the environmental and social objectives and principles that guide a project to achieve sound performance. It also summarizes the applicable socio-environmental processes, as well as the structure and operation of the project’s ESMS. This document defines the “roadmap” and, as such, is complementary to and interrelated with the other components of the ESMS. The framework will indicate who, within the borrower’s organization, will be responsible for its execution. The borrower will communicate the framework at all relevant levels of the project.
- Identification of risks and impacts according to the type, size and location of the project. All relevant environmental and social risks and impacts of the project, which may be direct, indirect or cumulative, will be considered in the process. The scope of this process will be determined by the application of the mitigation hierarchy, in accordance with good international practices in the corresponding sector. On the other hand, the dynamic nature of developing a project must be recognized and integrated into the process of identifying environmental and social risks and impacts, which requires adequate evaluation tools to identify risks and impacts, such as analysis of alternatives, background studies, environmental and social assessments, audits, surveys, specialized studies and consultations with technical specialists.
- Management programs that include mitigation measures to address the environmental and social risks and impacts that have been identified in the project. Programs may consist of a documented combination of operating procedures, practices, plans, and existing legal agreements between the borrower and third parties, which address mitigation measures related to specific impacts. Environmental and social action plans will be established in these programs to define the desired results and actions, which will be proportional to the project’s risks and impacts and will take into consideration the results of the stakeholder engagement process.
- Organizational capacity and competence through a structure that defines the functions, responsibilities and powers for the application of the ESMS. This element includes human and financial resources, managerial and administrative commitment, and borrower personnel responsible for project implementation.
- Emergency preparedness and response to adequately address accidental and emergency situations related to the project that may harm people or the environment. It is important to ensure a participatory process with local government agencies in their preparations to respond effectively to emergency situations.
- Stakeholder engagement through an analysis of the people affected by the project, as well as those parties that are not directly affected but that have an interest in the project, such as national and local authorities, neighboring projects or non-governmental organizations. This element helps define the consultation processes, grievance mechanisms and information disclosure strategies, among others. Stakeholder engagement is a continuous and iterative process whereby the borrower or project facilitates two-way interaction with said stakeholders.
- Monitoring and review according to the project’s environmental and social risks and impacts and its compliance requirements. This element is the main way in which the borrower can control and evaluate the progress in the project’s implementation and management programs, including the adaptation of the ESMS to real conditions during the execution stage.
A solid ESMS under the IDB’s new ESPF will identify and evaluate the social and environmental aspects of the operations it finances, taking into account not only applicable national regulations but also international standards that are more demanding than national regulations. For example, it will take into consideration resilience to natural hazards and climate change, protection for individuals and groups in situations of vulnerability, project-level grievance mechanisms, the need for additional public consultations, or the management of community health and safety risks and impacts.
The adoption of a systematic approach through the implementation of an ESMS promotes a comprehensive and adaptive management of environmental and social risks in IDB projects that is line with the objectives of the new Environmental and Social Policy Framework, thus guaranteeing their sustainability. To achieve this, it is essential that the ESMS is perceived not only as a requirement, but as a tool that provides added value to projects.
For more information, please download this interactive PDF on the elements of an ESMS:
This blog post is part of a series about the IDB‘s new Environmental and Social Policy Framework (ESPF). You may also want to read: