ESG Standards In Heavy Manufacturing

By CDC

ESG Standards In Heavy Manufacturing

“I’m proud to say Athi River Steel Plant is one step ahead of any other steel manufacturing company in Kenya. We are the benchmark as far as health and safety policy implementation is concerned. Our safety record has improved tremendously.”

IMPROVING ESG STANDARDS

The air rings with the jangling sounds of banging metal and the orange glow of hot metal sears through the factory floor.

Walking through this is Peter Muigai, a health and safety consultant employed by Athi Steel, one of the leading steel mills in East Africa producing billets, a range of bars and sections, bolts, wire products and borehole pipes. This is all part of a drive by Athi Steel to take environmental, social and governance matters seriously and key to this is the health and safety of the workers.

This can be challenging since accidents and injuries can and do occur. Co-founder Ravi Gupta makes health and safety a top priority at the company and appreciates it is an ongoing process.

“The company is very serious about health and safety. We have a zero tolerance to accidents. We recruit unskilled workers and train them. We train them on small machines and then promote them to the bigger machines. Athi Steel, one of Kenya’s largest steel mills, can be a hazardous environment in which to work.”

Athi Steel is committed to ensuring that all their operations meet international standards and has introduced several measures to address health and safety including implementing a HSE (Health, Safety and Environment) policy, and engaging a health and safety consultant. Continuous training for the workers, as well as procedures such as ‘toolbox meetings’ where health and safety is discussed before each shift, are also important.

As well as improving its ESG standards, Athi Steel has been very successful as a business. Turnover has risen from US $188,000 when it first started in the late 1990s to US $18m today and the number of employees has risen from 29 employees to nearly 800 today.

A BOTTOM-UP APPROACH

Athi Steel has also improved health and safety by introducing a bottom-up approach where workers can have meetings and put forward to management their own suggestions for health and safety improvements. They have found a bottom-up approach to be very effective.

“Workers come with recommendations. For example, it could be about changing or improving personal safety equipment. From recommendation, it will go to the health and safety consultant, then they will recommend it to the higher management,”

said Christopher Wangul, Human Resources Officer, Athi Steel.

Instilling a different culture, however, has had its challenges.

“In this part of the world we’re not used to working with personal protective equipment like gloves. We’re used to working with our bare hands. We’re used to working barefoot. So when someone has to work having his helmet on, having glasses on, it becomes a bother to him. So it’s a question of training,”

said Peter Muigai, Health and Safety Consultant, Athi Steel.

CDC: WORKING WITH FUND MANAGERS ON ESG

We are a patient and pioneering investor, putting capital to work in challenging markets. CDC first invested in Athi Steel in 1998 and then made a later investment of nearly US$1.3 m in 2006 through local fund manager The Abraaj Group.

To achieve a lasting development impact CDC must invest responsibly. So CDC requires all its investment partners to assess and improve ESG. CDC operates in some of the most difficult environments of the world and therefore ESG standards need constantly to be improved. CDC believes that operating to high ESG standards is a fundamental part of business success.

The Abraaj Group,assists Athi Steel on ESG issues.

“When we deal with our investees, we’ve always articulated the importance of ESG in building sustainable investment, and CDC has always been part of a core group of investors that support the thesis of ESG and sustainable investing,”

Peter Njoka, The Abraaj Group, Kenya.

CDC’s Investment Code, to which CDC’s fund managers must adhere, requires investee businesses to assess, monitor and improve ESG standards towards international best practice. Businesses are not expected to be perfect when CDC first invests, but CDC does expect fund managers to work with companies to improve standards over time. In the case of Athi Steel, where workers operate heavy machinery in a hazardous environment, CDC has supported fund manager The Abraaj Group initiatives to improve health and safety at Athi Steel. Improving ESG standards is an important part of managing a successful, sustainable business and goes hand-in-hand with being profitable.

Through the continued support of The Abraaj Group and CDC, Athi Steel is today one of the leading steel producers in East Africa. Ravi Gupta is now planning to expand into Tanzania into a 200 acre site and consequently increase the export of steel products.

“Improving the management of ESG issues is an essential part of building a business that will survive in the long run. We have a great opportunity to help to make businesses more responsible and sustainable, but this often takes time and patience to achieve.”

Sam Lacey, ESG Executive, CDC

INVESTMENT DATA

Investee Company

Athi Steel

Location

Kenya, Africa

Fund Manager

The Abraaj Group

Investing Fund

Aureos East Africa Fund

CDC Commitment to the Fund

US$8m

Date of Commitment

2003

Editor’s Note: This blog was previously published on CDC and is reproduced with permission.

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