Malaysia: Investigation of freedom of association concerns

In April 2018, CAO completed a compliance investigation of IFC’s investment in Bilt Paper. The investigation responded to a 2015 complaint concerning a Bilt subsidiary, Sabah Forest Industries (SFI), in Malaysia. The complaint was filed by the Building and Woodworkers International on behalf of the Sabah Timber Industry Employees Union (STIEU). They alleged the company hindered workers’ efforts to unionize, including through legal challenges to prevent recognition of the union.

The investigation found that IFC did not correctly apply IFC’s Performance Standard 2 on Labor and Working Conditions, which recognizes the fundamental rights of workers to organize. Specifically, CAO found that IFC did not ensure compliance with Performance Standard 2 requirements on Freedom of Association.

In response to CAO’s compliance findings, IFC acknowledged that its client’s attempts to block union formation were not consistent with the requirements of Performance Standard 2. At the same time, however, IFC noted that factors including the client’s financial distress had hindered IFC’s ability to work with the client to achieve compliance. Given plans to sell the company, IFC’s response to the investigation commits to engaging with the new owners to explain IFC’s environmental and social due diligence findings and mitigation measures required for achieving compliance with the labor policy. CAO is monitoring the case.