IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because the specific environmental and social impacts that may result can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, and field visits by IFC staff to representative operations of Sveza. This new investment will be a corporate loan, and the key issues reviewed during appraisal included the following: implementation of environmental management systems; application of sustainable forestry management and harvesting techniques; air emissions; liquid effluent handling; solid and hazardous waste handling and disposal; use of formaldehyde in resins; fire protection and emergency response; and general worker health and safety, including exposure to dust and vapors.

The company has presented plans and supporting information which confirms that its operations will comply with the environmental and social requirements, host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts are being addressed by the sponsor is summarized in the paragraphs that follow. - Plywood Mills: Sveza’s existing mills include Fanplit (Kostroma, Kostroma Oblast), Novator (Veliky Ustjug, Vologda Oblast) and Ust Izhora (St. Petersburg, Leningrad Oblast). The Fanplit mill includes two sites, the original mill in the middle of Kostroma, and a new site in an industrial suburb. Both plants are well maintained, with excellent housekeeping. Boilers and furnaces for veneer dryers are fired with wood waste, and emissions are within IFC guidelines. Ventilation and dust control is excellent in these mills, and there are no apparent odors from glues and resins. Wastewater is all sent to municipal wastewater treatment systems. Urea and formaldehyde are used in making glues for the plywood, and these are well controlled. Products at this and the other mills all meet E1 specifications for formaldehyde emissions. Worker health and safety aspects are generally properly handled, with some improvements needed in terms of use of personal protective equipment (PPE), especially in noisy areas. Fire protection measures are implemented over most of the site, including hydrants and extinguishers. Smoke detectors and alarm systems are needed in some warehouse areas in the older plant, and IFC will require the company to carry out a review of fire and life safety at all plants in order to confirm where upgrades are needed and to prepare a plan for any remedial actions. The Novator plant was established in 1910, but was only recently privatized and acquired by Sveza. Sveza will implement a program to upgrade the machinery and physical facilities. Air emissions from the main boiler are being studied, but particulates appear to exceed IFC guidelines and will be brought into compliance as part of the ongoing improvements. Dust control is good throughout the plant, but general housekeeping needs improvement as part of the upgrade process. Wastewater is treated on site before discharge to the adjacent river, and the effluent meets IFC guidelines. Worker health and safety aspects need substantial improvement in this plant, including equipment shielding, noise control and use of PPE. This will be addressed as part of the plant upgrade process. Fire protection measures are implemented over most of the site, with some improvements needed in warehouse areas. This operation includes a small satellite mill which produces T&G flooring and siding, and which needs improved pollution control on its boiler to reduce particulate emissions. The Ust Izhora plant is located in the suburbs of St. Petersburg. This plant is well maintained, with good housekeeping. Air emissions meet local and IFC guidelines. The plant has its own wastewater treatment system, using an activated sludge system with chlorination before discharge to the river. Worker health and safety is adequately addressed, with the need for attention to use of proper PPE. Fire safety measures include the use of extinguishers, hydrants and the plant has a fire response team and fire trucks. This plant expects to achieve ISO 9001 quality certification this year, and is working on ISO 14001 certification. Sveza is committed to ensuring that these plants are operated in full compliance with IFC’s emission requirements and health and safety procedures as specified in the relevant World Bank Group guidelines. Sveza will upgrade its monitoring programs to ensure accurate reporting on these elements. Sveza will, in addition, apply the same standards and requirements to any new mills which it acquires in the future. - Environmental and Health and Safety Management Systems: Sveza has started the process of implementing environmental management systems in its mills, and this will be continued and expanded to include health and safety measures, as well. Sveza will be required to implement integrated environmental and health and safety management systems (certified to ISO 14001 and OHSAS 18001 standards) in all of their mills, which will provide a clear management framework for dealing with issues and ensuring continued improvement in practices and conditions. - Forest Harvesting: Sveza obtains its wood supply for its mills from numerous harvesting companies, some of which are wholly or partially owned by Sveza. Going forward, Sveza expects to acquire additional harvesting companies to ensure quality and security of supply. Sveza is committed to ensuring that all of its operations are conducted in an environmentally and socially sustainable manner, including the application of sustainable forest management in all of its forestry operations. For harvesting companies which it owns, or has management control over, Sveza will ensure that (a) the companies implement an environmental and health and safety management system which is appropriate to their scale of operations; (b) all harvesting and other forestry operations are fully compliant with Russian laws and regulations, and are conducted according to internationally-accepted standard operating procedures which have been developed for Russian conditions; and, (c) for any long-term concessions, the company will achieve and maintain an appropriate independent certification for sustainable forest management. Sveza will develop and agree with IFC a schedule and action plan, which will be publicly disclosed, for implementation of these requirements prior to disbursement of this investment. For other harvesting companies from which it obtains wood, Sveza will encourage these operators to adopt similar operating policies and procedures, and will phase in requirements in this regard according to a schedule to be agreed with IFC.

This ERS contains the full environmental and social documentation prepared for the project.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

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 and Social 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.