Assessment of ESHR issues in accordance with national and international standards
Sustainability in all its various dimensions is an important aspect of foreign trade promotion by the Federal Republic of Germany. The assessment of environmental, social and human rights issues is based both on national and international standards.
As far as projects and transactions falling within the scope of application of the OECD Common Approaches are concerned, a review of environmental, social and human rights aspects is mandatory and an integral part of the review process. This applies to all transactions where a credit period of more than two years has been agreed and the contract value amounts to at least 15 million euros.
The Federal Government goes beyond the requirements of the Common Approaches. If there are any indications that a transaction involves serious environmental, social and human rights risks, it will be subjected to a risk assessment irrespective of the credit period and the contract value involved.
As stipulated in the OECD Common Approaches, the Operational Safeguard Policies of the World Bank, the Performance Standards of the International Finance Corporation (IFC) and the Environmental, Health and Safety Guidelines of the World Bank Group are relevant for the assessment of ESHR issues.
Scope of application of the OECD Common Approaches
ESHR review process
To begin with it is checked whether your transaction requires an ESHR impact assessment.
Depending on the seriousness of the potential ESHR risks involved, the credit period and the order value, the transaction is then classified in an environmental risk category. The category defines the extent and depth of the review. The Common Approaches provide for three categories: A, B and C. In addition to the provisions of the Common Approaches the internal category E is assigned to supplies and services for existing plants which do not involve neither any substantial changes in capacity and function nor any substantial impacts on ESHR issues. Projects classified in Categories A and B are subjected to an in-depth ESHR review, projects of Category C do not require any further due diligence. Category E projects are only subjected to a summary review of the ESHR issues.
Performance of the review
The Common Approaches stipulate what standards are to be applied when the review is performed. As a rule, a project must meet the ESHR standards of the buyer’s country. In addition to that, the project is benchmarked against the international standards of the World Bank Group. Category A projects have potentially to have significant adverse environmental, social or human rights impacts. Consequently, the requirements for the due diligence are higher: an Environmental and Social Impact Assessment report (ESIA) has to be submitted. Projects which do not fall under the scope of application of the Common Approaches will be reviewed focussing on the material risks and without a complete benchmarking against international standards.
Example of a review for Category A: construction of a petrochemical plant (German version only) Example of a review for Category B: construction of plant for the production of medium density fibre board (German version only)
In the case that cover is granted subject to certain conditions being met, the compliance with these conditions will be controlled by means of subsequent monitoring.
Sustainability in all its
various dimensions is an
important aspect of
foreign trade promotion by the
Federal Republic of Germany.
What information is required?
The assessment of ESHR issues will be performed by our experts from the Department Sustainability. They will be pleased to explain individual aspects of the review to applicants and project participants and to assist them with the procurement of information and other necessary measures. The best way is to contact them at an early project stage.
In order to provide guidance on the aspects that may be important for the ESHR due diligence, you will find below a general questionnaire not linked to any sector of industry as well as sector-related questionnaires.
As far as necessary, field visits will be carried out, the German embassies in the buyers’ countries will be involved or also external experts (consultants) engaged to assist with their expertise.
More detailed information can also be found in the brochure “Hermes Cover Special – Assessment of environmental, social and human rights issues of export transactions: The Common Approaches” (PDF).