25897 - Procafecol

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Environmental & Social Review Summary

Project Number

25897

Company Name

PROMOTORA DE CAFE COLOMBIA S A

Date ESRS Disclosed

Apr 11, 2007

Country

Colombia

Region

Latin America and the Caribbean

Last Updated Date

Feb 19, 2017

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 28, 2007
Signed : Jun 29, 2007
Invested : May 15, 2008

Sector

Coffee, Cocoa, Tea

Industry

Agribusiness and Forestry

Department

Regional Industry - MAS LAC

Project Description

Procafecol (or the company) was founded in 2002 by the National Federation of Coffee Growers of Colombia (Fedecafe or the sponsor). The company operates under the “Juan Valdez” brand and markets “100% Colombian” coffee beans and fresh-brewed coffees and beverages through its cafés, third party retailers and institutional clients. Since its inception in 2002 the company has grown from a single café in Bogotá to 58 cafés in 2006 (46 in Colombia, 10 in the U.S. and 2 in Spain). Fedecafe owns about 83% of Procafecol, over 22,000 individual coffee growers own 16% of the company and 1% is held by others. Procafecol is inviting IFC to participate with up to $20 million in the form of an equity or quasi-equity subscription to finance its expansion plan that includes opening 50 new stores in Colombia.

Fedecafe is an 80 year old not for profit organization entirely owned and controlled by 360,000 Colombian coffee farmers of which 95% run small family-owned farms with less than 5 hectares. Fedecafe’s mission is to promote economic and social well-being and a fair trade environment for Colombian coffee growers.

Overview of IFC's Scope of Review

The review of this project consisted of appraising technical, environmental, labor, health, safety and social information provided by Procafecol, and a field visit in March 5-12, 2007. The social specialist visited the headquarters of the company at the Federacion Nacional de Cafeteros (Fedecafe) and four stores in Bogota, as well as coffee plantations, the Coffee Research Center (Cenicafe), the Coffee Growers Committee and the freeze-dried coffee plant in Caldas. The social specialist held meetings with senior management of Fedecafe and Procafecol.

E & S Project Categorization and Applicable Standard

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems
- PS2: Labor and Working Conditions
- PS3: Pollution Prevention and Abatement
- PS4: Community Health, Safety and Security
- PS5: Land Acquisition and Involuntary Resettlement

Stores are located in urban areas. There are no protected species or protected areas at or near the stores. There are no indigenous people in the area. The proposed project has no impact on culture heritage.

Environmental and Social Mitigation Measures

Procafecol has plans to address any impacts to ensure that the proposed operations comply with the host country laws and regulations; IFC environment and social performance standards; and the IFC/WBG environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the company is summarized in the paragraphs that follow.

- 1. Social and Environmental Assessment and Management Systems

Environmental and Social Assessment:

All environmental, sanitation, occupational health and safety permits required by local laws are obtained for each step of the process before Procafecol starts developing, constructing and operating new stores. Procafecol will ensure that all future projects in Colombia and abroad comply with IFC Performance Standards.

Management Systems and Organization:

Procafecol’s management is sensitive to environmental, occupational health and safety and social development aspects (EHS&S) of its operations. There are EHS&S coordinators in each store who have the responsibility of implementing corrective measures, monitoring and reporting performance. In accordance to local regulations Procafecol has established clear and quantifiable EHS&S objectives, and has developed an action plan to meet these objectives. This action plan includes resources, timelines and responsibilities for implementation. Procafecol has also implemented an appropriate system to manage human resources aspects.

Training:

Procafecol has an established program to provide necessary training for all its direct and contracted employees on the environmental and health and safety aspects related to its operations.

- 2. Labor and Working Conditions

Human Resources Policy and Management: Procafecol has a Human Resources policy which specifies the terms of employment and working conditions at the company. These include procedures for selection, hiring, training, promotion, resignation, lay-off and firing. It also specifies wages and benefits, working hours and overtime, leave and holidays, and non-harassment policy. The human resources function is a corporate function and is managed centrally by Procafecol’s human resources manager. At each store there is a responsible for this function. All policies, procedures and guidelines are made available to employees and follow the labor law of the countries where the stores are located. All employees in Colombia are covered by health insurance, pension fund and occupational risks insurance.

Grievance Mechanism:

Supervisors at each store are responsible for supervising the grievance process and ensuring proper follow-up for direct employees. Contracted employees can channel their grievances through the contracting company or through the store’s supervisor. The company’s human resources manager is informed of all complaints and records all corrective actions taken. Procafecol will be required to keep developing proper mechanisms for all workers, direct and contracted, to convey a concern or complaint to Procafecol''s management.

Non-Discrimination and Equal Opportunity:

Procafecol has non-discrimination, equal opportunity employment and non-harassment policies and complies with local legislation on these issues.

Protecting the Work Force:

Procafecol complies with Colombian law, and the minimum age of hiring is 18 years old. Procafecol will continue ensuring that the contractors they use comply with national laws and IFC Performance Standards.

- Occupational health and safety (OHS):

The Human Resources Department manages the occupational health and safety (OHS) issues at Procafecol. The Company has developed an OHS program with effective procedures, tools and adequate personal protection equipment for each activity at the stores. Occupational risks analysis and OHS plans (Panorama de Riesgo) are developed for each store in accordance to the regulations of the host country. There are routine OHS talks with employees and emergency response brigades are set up at each one of the stores. Procafecol monitors workplace conditions and ensures they meet local regulatory requirements. Procafecol will be required to maintain this OHS management system and update it as necessary to continue complying with local regulations and IFC performance standards. As per Performance Standard 2, the occupational health and safety requirement is applicable to Procafecol direct employees and employees contracted through contractors only.

- Supply chain:

Procafecol buys coffee directly from Fedecafe ensuring that fair trade, labor and environmentally-friendly coffee production practices are followed. An increasing percentage of the coffee sold by Procafecol comes from coffee plantations certified under Fair Trade, Utz Kapeh or Rainforest Alliance standards, which are worldwide certification programs for responsible coffee production and sourcing. According to Colombian law, no exploitative child labor is allowed in coffee production, and additionally Fedecafe has addressed child labor issues through education programs and currently school attendance is higher in the coffee growing areas than in others parts of the country.

Almacafe S.A, the company in charge of coffee selection and packaging, is also a subsidiary of Fedecafe and follows corporate and national labor and OHS requirements. Merchandise sold at the stores (t-shirts, umbrellas, bags, handicrafts, etc) are provided by legally constituted companies registered at the chamber of commerce which comply with local labor and OHS standards.

- 3. Pollution Prevention and Abatement

Procafecol includes their management of environmental aspects as part of the sanitation and quality function. Environmental issues managed and monitored are listed below.

Effluent treatment and disposal:

Procafecol''s activities do not generate industrial liquid waste. The Company has established liquid waste management mechanisms, including grease traps, at all the stores as part of its sanitation procedures. Domestic liquid waste (e.g. sanitary) is discharged to the municipal sewer system.

Solid waste management program:

Solid waste generated by the stores is basically carton, plastic, paper and organic residues. Solid waste is categorized, segregated and stored in appropriately marked areas/bins and disposed in accordance with relevant regulations.

Potable water and energy supplies. Potable water and energy are supplied by public sources. No energy generators are used in its operations.

Pest management and control: The company has established a pest control and management program for insects and rodents. It includes strict sanitation procedures and the use of pesticides conducted by certified companies favoring environmentally friendly products.

- 4. Community Health, Safety and Security

Community health, safety and security:

Stores are located in urban areas. Procafecol''s priority is to ensure the health, safety and security of clients and surrounding community. Security guards are used in some of the larger stores and are not armed. These are subcontracted and managed by an experienced company, which has ensured appropriate procedures are in place and constant training is provided to all security guards in accordance to Colombian regulations.

Fire prevention and emergency preparedness and response:

There is adequate fire fighting equipment onsite and it is properly maintained. The external fire trucks and ambulances can reach each store in five to ten minutes. Fire prevention and emergency response are included in all employee trainings and there is a person in charge of coordinating fire emergency response in each store.

- 5. Land Acquisition and Involuntary Resettlement

The Store Location Department is responsible for the development, design, construction and opening of new stores. As part of this process, Procafecol identifies locations for future stores and undertakes a study to verify that there is no legal claim and that the property is not occupied or being used by other persons other than the owner. Additionally, the company confirms that the property is in an area zoned for commercial activities. In cases where the property being acquired, leased or rented has legal problems, Procafecol would abstain from using the location for future development. After this initial assessment it enters into conversation with the owners and negotiates the best agreement for both (buying, renting, and leasing). Procafecol will continue ensuring compliance with IFC Performance Standards in future land acquisition processes.

Monitoring and compliance:

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 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.

Stakeholder Engagement

Fedecafe has a democratic hierarchy based on 371 Municipal Committees which are democratically elected at the grassroots level. Fedecafe guarantees that the growers will not be abused by intermediaries since they will always have a buyer of last resort paying in cash at the highest market price providing for a fair trade environment.

Fedecafe’s social programs help to improve the standard of living for the more than four million Colombians (almost 15% of the population) that depend upon coffee for their livelihood. Fedecafe has established thousands of miles of access roads, safe and adequate water supplies, schools, electrification, housing, health centers and a number of coffee processing facilities. In addition to improved living conditions, coffee growers have been able to benefit from low-cost loans, company stores and cooperatives, and training in managing and diversifying their crops. As a result, almost 80% of households in coffee-growing areas have access to a local primary school, and levels of literacy in these regions, as well as overall human development indicators, significantly exceed the national average. Fedecafe also develops and promotes ecologically sound growing and production methods through Cenicafe and its rural extension service.

As part of Fedecafe, one of Procafecol’s corporate objectives is to contribute to improving the living standards of Colombian coffee growers, and its revenues translate into social development programs directed to coffee farmers through Fedecafe. Procafecol’s product portfolio includes a variety of socially responsible coffees that include certified coffees (Fair Trade, Utz Kapeh or Rainforest Alliance ) and limited editions of coffees that benefits vulnerable coffee producing communities (i.e. displaced population, indigenous communities, female headed farms, alternative to illicit crops, etc). Additionally, Procafecol makes efforts to include inputs and merchandise (clothing, special packaging, cup holders, etc.) in its operations produced by community organizations that generate additional income to vulnerable families.

Client’s contacts:

German Martinez, CFO
Procafecol S.A.
Calle 73 Numero 8-13
Torre B, Piso 2
Bogota, Columbia
57-1-313-7362

National newspaper will carry notification about project. Environmental documents will be made available on company’s website: http://www.juanvaldezcafe.com/

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Environmental and Social Review Summary (ESRS) is prepared by IFC to disclose its findings and recommendations related to environmental and social considerations regarding potential investments. Its purpose is to enhance the transparency of IFC's activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this ESRS is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein.
It is distributed in advance of IFC Board of Directors' consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following ESRS is disclosed in accordance with IFC's Access to Information Policy (AIP).

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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