11414 - Coca Cola SABCO (Pty) Ltd

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Environmental Review Summary

Project Number

11414

Company Name

COCA-COLA SABCO (PTY) LTD

Date ERS Disclosed

Apr 11, 2002

Country

Africa Region

Region

Africa

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : May 21, 2002
Signed : Jun 26, 2002
Invested : Oct 15, 2002

Sector

Soft Drink

Industry

other

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

The proposed financing is to enable the Coca-Cola SABCO Group to expand its existing operations in southern and eastern Africa. SABCO is an "anchor bottler" for the Coca-Cola Company in the region and is one of a relatively small number of bottling groups worldwide where Coca-Cola has a significant equity stake. It is headquartered in Port Elizabeth, South Africa. The SABCO joint venture produces a wide range of soft drinks brands under nonexclusive license arrangements with Coca-Cola. It has over 10 subsidiary companies and 21 bottling plants in the region producing and distributing Coca-Cola, Sprite, Fanta, as well as other branded soft drinks.

The project consists of the expansion of production and distribution facilities at the SABCO bottling companies in the following countries: Mozambique, Ethiopia, Kenya, Tanzania and Uganda. The expansions will take place mostly at existing plants, although, SABCO is likely to acquire some existing bottling companies over the next year or two which will also be re-equipped and expanded. The SABCO group already directly employs over 8,500 people in its operations in 8 countries. It produces 132 million unit cases annually and supports a network of other businesses which supply it with goods and services. A number of the subsidiaries are joint ventures with local partners who play important operational roles.

Environmental and Social

The sponsor has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific measures agreed, comply with applicable host country laws and regulations and World Bank/IFC requirements. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow.

Development of an appropriate environmental management system: In accordance with Coca-Cola’s global requirements for its anchor bottlers, Coca-Cola commenced, in 1995 and 1997, a program of conducting independent environmental audits at all of its bottling and distribution plants. IFC has reviewed a sample of the audit reports and found them to be comprehensive in the range of issues covered, as well as detailed in terms of both findings and recommended corrective action plans (CAPs). As a result of the audit findings, and in conformance with Coca-Cola’s overall Quality System (QS) requirements, SABCO has implemented a detailed ‘continuous improvement’ Environmental Management System (EMS) that applies to all of its bottling and distribution facilities. The Coca-Cola QS is consistent with the provisions of ISO 14001, although many of its elements are significantly more stringent than the ISO requirements. Under the EMS/QS an Environmental Coordinator (EC) has been designated for each region. All of the ECs have attended Coca-Cola’s 3-day environmental management/quality system training course. The ECs provide monthly monitoring reports on key aspects of EMS compliance to the SABCO Group Quality Manager (GQM), who has overall responsibility for implementing the EMS. These results are summarized in a monthly report to SABCO senior management.

In conformance with the EMS, SABCO requires an independent Environmental Impact Assessment (EIA) for any new ‘greenfield’ plant it develops, as well as a comprehensive audit of any existing plants it acquires. As part of its corporate environmental audit program, unannounced follow-up audits have been conducted at 12 facilities by the Coca-Cola Company, and the results of these incorporated into the facility CAP. In addition, Coca-Cola carries out annual audits of selected facilities to ensure compliance with its QS requirements. SABCO’s GQM recently initiated a new training program for all ECs, under which they will be trained to conduct audits in accordance with Coca-Cola requirements and consistent with international best practice.

Compliance with host country laws and IFC labor policies: SABCO’s labor policies and programs are dictated by (1) the labor laws and policies of each of the host countries in which SABCO operates, and (2) by any collective agreements signed with trade unions. SABCO has reviewed IFC’s policy on harmful child labor and confirmed that its own labor policies are in conformance with these requirements. SABCO’s human resources managers regularly monitor changes in the labor laws and regulations in each of the countries in which SABCO operates, to ensure that SABCO’s own policies and programs keep pace with host country requirements.

Numbers of existing employees to be retrenched as part of the project, if applicable: The project is an expansion of SABCO’s existing operations. As a result, no employees are expected to be retrenched specifically as a result of the project. However, retrenchments may occur as a result of other factors at some of the company''s plants. Where retrenchments are necessary, SABCO''s approach is to undertake them fairly, equitably and transparently. The relevant unions are involved early in the process, and play an active role in determining how the specific retrenchment plan is carried out. SABCO''s policy is to conform fully with host country labor laws in terms of the severance packages provided. In practice, SABCO''s retrenchment packages typically exceed the government requirements in financial and other forms of compensation. SABCO also ensures that retrenched employees are aware of any other national or local benefits available to them and assists employees in applying for and receiving these benefits. The company also works closely with local NGOs and other groups to provide training to employees who are being retrenched and, where possible, assists retrenched employees in setting up their own income-generating enterprises. For example, SABCO recently assisted a number of retrenched employees in setting up small shops or kiosks to sell SABCO products, financing their initial stock and providing them with basic business skills training. Retrenched employees are generally given preference for employment in similar positions with SABCO if and when these become available.

SABCO’s corporate program for worker health and safety that applies to all plants, in addition to host country requirements: SABCO has a detailed program for employee health and safety. The program is consistent with Coca-Cola’s global standards and benefits system, as well as the laws and regulations of each of the host countries in which SABCO operates. Where local laws and regulations differ, SABCO complies with the more stringent of these. All SABCO employees receive health and safety training as part of their induction training, as well as periodic ‘refresher’ courses on key issues or new topics. This training extends to broader health issues such as HIV/AIDS and – in countries where prevalent – malaria prevention and treatment. SABCO’s H&S program is continually revised and updated to reflect global improvements and developments in the field of corporate health and safety.

Corporate responsibility initiatives: SABCO views its corporate citizenship role as a fundamental part of its operations. The company’s strategic plan includes as a specific objective being a ‘model corporate citizen'' in all the communities in which it operates, thereby demonstrating that it takes its role in the community seriously. SABCO has undertaken a comprehensive internal HIV/AIDS project for its staff. In addition to providing financial support to local programs/charities in the communities where it operates, SABCO also shares its ‘intellectual capital’ with the community by, for example, helping community/charity organizations develop strategic plans. SABCO also conducts training for community groups where capacity permits. This initiative includes an element of community impact which SABCO terms ‘cause marketing,’ as it is directly linked to the company’s value chain. SABCO also sponsors community events such as sports or cultural events and tries as much as possible to support particularly poor areas. In 2001 The Coca-Cola Company signed an alliance agreement with UN AIDS to fight HIV/AIDS on the African continent. The initiative has the full backing of Coca-Cola headquarters in Atlanta, as well as the bottlers in Africa. One of the objectives of the alliance is to find innovative ways of using the Coca-Cola system infrastructure to assist in distributing materials, primarily educational, into the more remote areas where Coca-Cola distributes. SABCO, along with other Coca-Cola bottlers, is expected to play a key role in this regard. SABCO and the rest of the alliance are currently investigating potential projects to determine how the initiative can be most effective. In addition to using the vast Coca-Cola distribution network, the alliance intends to undertake other programs as well. Coca-Cola Africa has seconded one of their marketing staff in a full-time capacity to UN AIDS, to assist them with their marketing. The Coca-Cola system has also pledged to share general marketing expertise and, at times, marketing infrastructure with UN AIDS, In Kenya, for example, the Coca-Cola system donated several billboards for use for HIV Aids education. SABCO, as a key member of the alliance, is also playing an advocacy role encouraging other corporates in the region to become involved in the fight against HIV Aids. SABCO has been looking at ways of encouraging its business partners, such as advertising agencies, to get involved in the initiative. SABCO’s aim is to have a project up and running in each of its territories by year end.

Source, quality and volumes of water required: In October 2001 SABCO instituted a monthly water use monitoring program at all of its plants, as part of its EMS requirements. The monitoring is carried out by the ECs, who provide monthly data on water usage to the Group Quality Manager. These data are used as the basis for monitoring water use over time, as well as for identifying facilities where water use can be reduced. Water recycling programs are in operation at several of SABCO’s bottling plants. SABCO has introduced reverse osmosis cleaning methods at one of its facilities (Nairobi bottlers) that will considerably reduce the water volumes used. At the Dar Es Salaam facility, the plant makes use of reverse osmosis to process un-potable brackish water or sea water converting it into potable treated water for product. This has reduced considerably the water volumes used. Plans are in place to extend the use of this and similar technology to several other plants (including Pietersburg, SA and Nakuru, Kenya where water is a scarce or expensive resource) over the next several years.

Source of power supply including fuel storage if applicable: There is considerable variation in the reliability of power supplies at each of the bottling plants, depending on the quality of the electric utility entity in the particular host country. All of the facilities draw from the relevant national grid, but backup generators are in place at the following facilities: Nairobi, Nakuru, and Machakos in Kenya; Kampala, Mbarara, Dar Es Salaam, Mbeya, and Zanzibar in Tanzania; Addis Ababa and Dire Dawa in Ethiopia; and Nampula, Chimoio, and Maputo in Mozambique. In conformance with the its EMS, all above-ground fuel storage areas (for both backup power and vehicle refueling) are equipped with secondary containment structure (generally cement floors and bund walls) to ensure that spills or leaks do not migrate to soils, surface water or groundwater sources. SABCO conducts daily checks on all underground storage tanks for evidence of leaks through establishing a theoretical and actual tank volumes using dip stick methods. Variances are investigated to establish cause. In addition every two to five years integrity testing for all underground tanks takes place by the tank owners (suppliers of the contents) and SABCO has instituted a program to convert all underground tanks to above-ground structures over the next several years.

Air emissions from boilers and other sources: SABCO has boilers at each of the bottling plants to produce steam for bottle washing operations. Boiler capacities in the group range in size from 2.5 to 4 tons of steam per hour. Boiler emissions are tested by Agents for the Boiler Manufacturers at most facilities on an annual basis to confirm that the emissions are less than those prescribed by The Coca-Cola Company. The type of fuel used varies from plant to plant but is generally heavy fuel oil, (Kenya) coal or anthracite, or diesel (Mozambique.)

Handling, recycling and disposal of solid and liquid wastes: SABCO’s EMS contains detailed programs for sorting, reusing and recycling solid wastes. Waste paper, cardboards, glass and metal containers are all collected, sorted and recycled where possible. SABCO is a corporate sponsor of national recycling initiatives such as South Africa''s ‘Collect a Can’ program. In addition, SABCO has initiated community recycling programs in several of the localities in which it has facilities. Under this initiative, SABCO provides technical and logistical assistance to the community in setting up the program, but the program is managed by the community and any revenues collected (e.g., from the sale of waste paper) are retained by community. The SABCO EMS contains special provisions for handling and disposing hazardous wastes (e.g., solvents, dried paints, used fluorescent bulbs). In countries where regulated hazardous waste landfills are available (e.g., South Africa, Uganda) wastes are disposed of in accordance with local requirements. In other countries, these wastes are collected, sealed and disposed of in a manner that ensures that they are do not come into contact with either the physical or human environment. Waste oils are collected by local petroleum product companies operating in each of the communities in which SABCO has operations . SABCO requires these companies to confirm in writing the manner in which they, in turn, are disposing of the used waste oils. Process wastewater is a significant issue at SABCO’s bottling plants. Volumes produced are large, and untreated wastewater typically is alkaline (pH of 9-10) and has high BOD levels (500-1000 ppm). SABCO’s policy is to treat all process wastewater to comply with host country discharge standards and requirements or those of The Coca-Cola Company’s Good Environmental Practice (GEP) on Waste Water Quality. Where no standards exist, SABCO applies the Coca Cola standards. The GEP specifies limits for 19 parameters, which are comparable to World Bank limits for key parameters. These parameters must be monitored, on a quarterly basis, on effluent discharged to natural bodies of water and the construction of a fish habitat for treated effluent. SABCO is currently operating aerobic wastewater treatment plants that include both primary and secondary treatment of effluent in the following facilities: Kampala and Nampula (type: submerged activated fixed film), Chimoio and Mbarara (activated sludge). SABCO has committed themselves to full compliance to the requirements of the GEP on wastewater discharge standards by the year 2004. This will entail the construction of wastewater effluent treatment plants (primary and/or secondary) at those facilities currently not discharging to a municipal treatment facility.

Provision of personal protective equipment and training for employees: A key part of Employees are provided with personal protective clothing and equipment in accordance with Coca-Cola’s global H&S program. Elements of the program include requisite uniforms for all employees; protective equipment for employees working in higher risk areas (e.g., cleaning and sterilization operations); and requisite training for employees working with hazardous substances (e.g., acids). Additionally hearing tests are conducted and the wearing of hearing defenders in designated areas of the plant is mandatory.

Hygiene in the production and bottling area: Hygiene and product quality is accorded a high priority in all of SABCO’s operations. Under its ‘anchor bottler’ agreement with Coca-Cola, SABCO must follow rigorous hygiene, sterilization and quality control/quality assurance (QC/QA) protocols. All of the bottling plants are equipped with two laboratories – one to analyze product quality and one to analyze wastewater quality. The Beverage Quality Manual, issued by The Coca-Cola Company, specifies the design criteria for the production facilities. These comprehensive specifications detail building and equipment design requirements as well as process requirements that must be complied with to ensure that the best possible hygienic practices are followed. Regular internal Good Manufacturing Practice Audits are conducted in each facility as well as external systems and compliance audits conducted by The Coca-Cola Company annually.

Use of non-CFC refrigerants in cold storage and air conditioning systems: SABCO utilizes only CFC-free equipment in any of its new installations. The company has undertaken a conversion program for all of its older refrigeration units that utilize CFCs, under which CFCs are captured, properly disposed of to prevent migration to the atmosphere, and replaced with non-CFC gases.

General housekeeping and safety: As discussed, all of SABCO’s operations are governed by Coca-Cola’s extensive and detailed Coca-Cola Quality System. This system covers all aspects of quality control and quality assurance, including general housekeeping issues. The system requires daily monitoring of hygiene and housekeeping standards in each of the bottling plants.

Fire prevention and emergency response: SABCO has established ‘Incident Management’ teams at its HQ operations in Port Elizabeth and at each of its regional facilities. These teams have received training in fire prevention and response, as well as proper handling and risk management associated with hazardous substances (e.g., acids) in use at these facilities. Incident response drills are conducted regularly and the results of these are analyzed by both the regional and HQ Incident Management teams to ensure that gaps or weaknesses in emergency response procedures are identified and addressed.

Local disclosure: The ERS will be made available at all of SABCO''s offices in each of the five countries involved in the project (Mozambique, Ethiopia, Kenya, Tanzania and Uganda), in public buildings in the municipalities where those offices are located, and at the IFC/World Bank offices in each of these countries. Notices are to be published in a nationally distributed daily newspaper in each of the five countries announcing the availability of the ERS for public review.

Conclusion & Monitoring

IFC will evaluate the project''s compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering (i) the status of implementation of any measures contained in the Environmental Action Plan, and (ii) ongoing performance of project-specific environmental, health and safety and social activities, as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.

This Environmental Review Summary (ERS) is prepared and distributed in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Any documentation that is attached to this ERS has been prepared by the project sponsor or in conjunction with the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content. The following ERS is disclosed in accordance with IFC's Disclosure of Information Policy that went into effect September 1998.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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