IFC requires that this document be 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) provides specific details of where the Environmental Review Summary (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 a limited number of specific environmental impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. In view of the fact that this proposed investment is at the corporate level, environmental and social review of this project entailed an evaluation of a cross section of existing operations, which include the Costa Pinto, Rafard, Santa Helena, Univalem, Da Barra, Da Serra, Usati mills and the Santos Port Facility. Based upon discussions with engineering staff, remaining Cosan operations, which include San Francisco, Diamante, Dois Corregos, Junqueira, Ipaussu, and Gasa mills have similar operational issues and existing approaches to resolving the impacts listed below. The review analyzed the following potential environmental, health and safety, and social impacts: - Company mission and vision in the sector; - Systematic management of quality, environmental and social affairs; - Systematic management occupational health and safety; - Control of air emissions to the environment; - Management of liquid effluents; - Management of non-hazardous and hazardous liquid and solid wastes; - Control of pest species in cane rearing; - Labor practices in cane rearing operation; and - Social development programs. The identified environmental, health and safety, and social impacts, which require ameliorative activities are summarized in a Corrective Action Plan (CAP) that Cosan will implement as part of the Loan Agreement. Upon successful implementation of the agreed mitigation measures, the proposed project will meet Brazilian laws and regulations as well as the applicable World Bank/IFC environment, social, and health and safety policies and guidelines.

The sponsor has presented plans to address environmental, social, and health and safety impacts to ensure that the proposed project will comply, upon implementation of the specific agreed measures, with Brazilian and São Paulo State’s environmental and social laws and requirements and the World Bank/IFC environment, social, and health and safety policies and guidelines. Information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Further information is provided in detail in the attached Corrective Action Plan (CAP). - Company mission and vision in the sector. Overall, the company’s vision is to become a world-class sugar operation in which a sustainable, renewable resource (sugar cane) is used to produce sugar, electric power, and steam for its processing operations, electric power for the electric power grid, and organic chemicals such as anhydrous alcohol for motor fuels and other applications. World-class operations also entail conversion of solid and liquid waste into useable byproducts that promote beneficial land use, reduce stress on water sources, and reduce chemical fertilizer need and use. All of Cosan’s mills are operated in a manner consistent with this philosophy. For the company to reach its goal of world-class status in this industry and to comply with IFC/World Bank policies and guidelines, selected developmental and administrative changes are required. Specifically, Cosan needs to implement a systematic management approach that addresses quality and environmental and social affairs. This preferred approach is one way of obtaining desired performance without strict reliance upon key personalities. Cosan has integrated such a system into its port operations; the facility currently holds ISO 9001-2000 (quality), ISO 14000 (environmental management), and OHSAS 18000 (occupational health and safety) certifications. This nucleus will be utilized to implement these management programs into mills and agricultural operations consistent with the attached corrective action plan (CAP). - Systematic management of quality, environmental and social affairs. Although Cosan operates its agricultural holdings and mills in a manner consistent with the requirements of Brazilian and São Paulo State’s laws and regulations, the company has not yet appointed a corporate environmental management team including an assigned environmental manager at each operating unit. Similarly, they have not yet developed an environmental management system (EMS), comprehensive monitoring programs or required corrective measures required to close compliance gaps. In current practice and in place of these elements Cosan has a service contract with Gerenciamento e Engenharia Ambiental S/C LTDA (GEMA) for management of day-to-day environmental affairs. GEMA oversees all the environmental issues related to the company’s industrial and agricultural activities. To achieve systematic management of these issues Cosan will establish a corporate management team, consolidate company procedures and management plans, and implement the means to manage all elements consistently. This effort will guarantee continuity in the company’s operations, bring management of the company’s environmental affairs into compliance with direction from senior management, and aid in rapid integration of new facilities. Cosan will seek ISO 9001-2002 and ISO 14000 certification for its operations, consistent with the attached CAP. - Systematic management occupational health and safety. Cosan has implemented São Paulo’s State Environmental Risk Prevention Program (PPRA) independently in each operating unit. This program requires workplace monitoring, accident contingency plans, and equipment utilization manuals. In addition, each unit has an employee-training program. The Governmental Internal Commission for Accident Prevention (CIPA), as required by the Ministry of Labor, monitors compliance with the PPRA. Although Cosan’s approach to occupational health and safety (OHS) is structured in accordance with local regulatory requirements, collected occupational health and safety statistics for operations demonstrate a need for mandatory improvements to achieve compliance with IFC’s Occupational Health and Safety guideline. Cosan will implement a corporate OHS management system in each unit. This approach, which is required for successful management of safety issues, will aid in reducing observed lost time accidents and fatalities. Cosan will seek OHSAS 18000 certification for its operations consistent with the attached CAP. - Control of Air Emissions to the Environment. Air emissions from sugar cane mills generally meet São Paulo’s State regulations but exceed those established by the World Bank/IFC. Although all of Cosan’s boilers have wet scrubbers and/or cyclones installed, specific operations require optimization in accordance with the attached CAP to achieve compliance with IFC’s point source and ambient air emission standards for particulate and other parameters. Cosan has developed an integral program to completely eliminate cane burning in 20 years for those areas with a maximum slope of 12% (mechanized areas) and 30 years for those areas with slopes steeper than 12%. Cessation of open burning will dramatically improve ambient air quality throughout the affected regions. Additionally, Cosan has conducted feasibility studies for cogeneration. The company could produce up to 380 MW of electric power through cogeneration and export some 301 MW to local electrical grids. Implementation of cogeneration projects requires installation of new high efficiency, high-pressure boilers in the mills, which will also improve point source emissions and ambient air quality. - Control of liquid effluent emissions to the environment. Overall, Cosan’s water management is excellent. Most units are well below IFC’s water load target of 0.9 m3 per ton of cane processed and most are striving to recycle 100% of used water. Cosan’s mills treat process effluent in facultative lagoons. In most cases organic load levels are reduced by at least 95%, although some of these lagoons’ discharge’s exceed World Bank/IFC liquid effluent guidelines, including BOD levels above 50mg/L. Out of compliance lagoon systems will be modified and optimized in accordance with the CAP. Additionally, Cosan will implement a company-wide monitoring program to characterize lagoon performance and to identify required corrective actions. As a stimulus for further water management economy, the Sate of São Paulo will, starting in 2005, charge US$0.0001 per m3 of water collected, US $0.1 per m3 consumed, and an undetermined amount per m3 of wastewater discharged to surface waters, which will be based on the organic load of the effluent. Another initiative in water consumption minimization is the clean cane (So Cana Pura) program, which has set a goal for the entire company to wash only 10-20% of its cane. As part of this effort, Cosan’s 2003-2004 goal is to collect 75% of cane harvests with a maximum soil content of 5kg per ton of cane and 100% of the collected cane with a maximum of 5% vegetable impurity. Other ongoing efforts to improve water management include closing most water circuits, installing cooling towers to eliminate wasteful spray ponds, and further reduction of water use. All sanitary wastewaters are treated in septic tanks and subsurface disposal systems. Storm water management varies; some is used for irrigation, and some is discharged to surface water. Cosan will continue to improve its water management programs and to achieve compliance with IFC guideline limits in accordance with the attached CAP. - Control of non-hazardous and hazardous liquid and solid waste. Cosan has implemented a sanitary and industrial waste management program. All wastes are segregated and either disposed of in certified landfills or sold for recycling. Cosan has implemented a spent distillery waste (vinaze) management program to deal with this highly concentrated organic waste stream. All vinaze, as well as all the filter cake and ash, is used for agricultural purposes. The vinaze, which is rich in potassium, is applied to the land through a network of pipes, primary canals, irrigation canals, pumps, and spray guns. Cosan fertilizes approximately 70,000 ha of land with this material, which has reduced the cost of fertilizer by ~50%. In compliance with São Paulo State’s regulatory requirements, all tanks and primary distribution canals must be lined to prevent ground water contamination within a 6 year time schedule. During Cosan’s first year of implementation, approximately 10% of the tanks were lined. In the coming year, the program is targeting 30% of tanks to be lined, the following year 50%, then 70%, then 90%, and by the sixth year all tanks must be lined. All primary canals must be lined within 10 years. - Control of Pest Species in Cane Rearing Operations. Cosan has implemented biological controls for the most significant sugar cane pests. There are five common pests that attack Cosan’s cane: cigarrinha, a cane root parasite, broca (Diatraea saccharalis) or cane borers, nematodes, a root parasite, cupins, or better known as termites, destroy cane roots and rhizomes, and Migdolus frianus and Sphenophorus levis, beetles which in their larvae stage destroy cane roots and rhizomes. Cosan will produce approximately 36,000 kg of Metarhizium anisopliae (this harvest season), which is a type of fungi whose spores when released attack cigarrinha. These fungi substitute for chemical pesticides previously used to combat cigarrinha. For broca control, Cosan’s laboratories breed a wasp species called Cotesia flavipes; the larvae of this wasp feed on broca. Approximately 235 million wasps will be produces by Cosan this harvest season. As with the fungi, this biological control mechanism serves to reduce chemical pesticide consumption. With regards to nematodes, Cosan has identified and mapped approximately 90% of the areas were these parasites are found. Depending on the type of nematode or its infestation level, different treatments are recommended. Today, chemical products are utilized, although a significant effort is being made by research institutions to find biological treatments. Termites are another pest infestation of economic significance for which a significant effort is being made to find biological treatments. Cosan has identified 85% of the areas in which these termites reside. Other non-chemical and biological approaches consistent with integrated pest management (e.g. crop rotation during the re-planting of cane) are being explored. Migdolus frianus and Sphenophorus levis infestations although currently addressed with chemical pesticides will be managed in the offing with biological control agents. Chemical pesticides and fertilizers used by Cosan and affiliates are moderately or slightly hazardous consistent with IFC guideline requirements and integrated pest management objectives. Cosan’s existing protective measures for users and applicators of chemical products comply with IFC guideline requirements. Cosan also uses chemical cane ripening agents, which have very low toxicities and half-lives. - Technical Assistance in the Sugar Cane Supply Chain. Since 1997 the company has developed a strong agricultural management system whereby cane is sourced both from Cosan’s own land and from third parties. Today, the company manages 240,000 ha of land, of which 48,000 are owned. Approximately 16 million tons of cane originates from the land they own and 10 million tons is purchased directly from farmers in the command area of each mill. Through this innovative and pioneer management system Cosan has been able to expand raw-material sourcing areas and have been able to decrease workmanship defects and downtime for equipment and administration staff. This has translated into higher income for the farmers and a closer working relationship between supplier and the mills. This system has also allowed the company to optimally adjust cane harvest timing, which has in consequence lowered associated crop loss risks. The company finances the “capital rotation” of the farmers and exerts total control of the quality of the process, using the same technological solutions and innovations adopted in the areas of self-administration. - Labor Practices in Cane Rearing and Sugar Production Operations. Cosan employs over 21,000 administration staff, agricultural personnel, and industrial personnel in 12 facilities. Cosan has a human resource policy that emphasizes compliance with São Paulo State’s regulations, implementation of training programs, and continuous staff motivation. The workforce normally comes from the region where each unit is located. The communities consider these units as work and income generators, which is very important for the local development. In some units, there is a lack of local work force, and workers from other states are hired during harvesting. The workers hired directly by the company on a temporary basis receive the same benefits as those hired for more permanent positions, as dictated by national labor laws. Workers hired for specific services also have the same rights as those hired directly by a unit. The company takes workers rights and safety very seriously and local legislation ensures workers rights and safety. Varied training programs for the work force are provided for employees in order standardize procedures in the production areas. Also, Cosan’s policy prohibits hiring of minors (under 18) for any kind of work. However, it does take part in the “Apprentice Program”, included in the Child and Adolescent Statute, aimed at the professional training of young people between the ages of 16-18 who study part time. As with environmental management, systematic management of all labor aspects is required to ensure that the management intent and direction is fully implemented at all levels. This program will be implemented in accordance with the CAP. - Social Development Programs. Cosan has extensive, direct relations with neighboring communities. Cosan’s administrative and agricultural management staff administers efforts focused on local communities. These include a wide range of activities such as donation of land areas for specific functions, support for educational programs, support for municipal projects, etc. In addition, Cosan has established two Foundations, primarily focused on funding and delivering beneficial program for Cosan employees. The Cosan Social Assistance Foundation, a non-profit organization, provides the company’s staff children with social education and pre-professional activities. This foundation attends to children and teenagers ages 4 months to 16 years. Its goal is to promote equality and social responsibility into each person’s objectives. The Pedro Ometto Foundation, also a non-profit organization, promotes good quality of life to Da Barra unit and associated companies staff members and their dependants. In total, this organization attends to 4,500 staff and 7,100 dependants in health, quality of life, and social benefits matters.

This ERS contains the full environmental and social documentation prepared for the project. Corrective Action Plan is attached below.

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: - the status of implementation of any measures contained in the ERS and the CAP, and - 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.