26199 - KuAz II

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Environmental & Social Review Summary

Project Number

26199

Company Name

KUIBYSHEVAZOT PAO

Date ESRS Disclosed

Jul 11, 2007

Country

Russian Federation

Region

Europe

Last Updated Date

Jan 6, 2022

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Feb 1, 2008
Signed : Feb 29, 2008
Invested : Apr 17, 2008

Sector

Plastics Material and Resin

Industry

Manufacturing

Department

Regional Industry MAS LAC & EUR

Project Description

The proposed project is an equity investment of up to $15 million in Kuibyshevazot Open Joint Stock Company (KuAz or the company), a leading Russian chemicals manufacturer and an existing IFC client. Located in Togliatti, Samara region, KuAz produces caprolactam (the raw material for synthetic fibers, engineering plastics, automotive and other downstream products), polyamide 6, and ammonia and nitrogenous fertilizers.

Overview of IFC's Scope of Review

The review of this project consisted of appraising technical, environmental, health, safety and social information submitted by the project sponsor, and a field visit in May 2007. The environmental and social (E&S) appraisal team visited the manufacturing site in Togliatti, Samara Region. The E&S team held meetings with the KuAz management team and tour the plant site and the industrial zone, where KuAz is located.

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

There is no land acquisition for this project. There are no protected species or natural protected area at or near the project site. Indigenous Peoples were not identified in the project area. Cultural Heritage was not identified in the project area.

This is a Category B project according to IFC’s Environmental and Social Review procedures because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

The project is for equity purchase and does not involve production expansion. The project site is located inside a large chemical industry zone, and there are certain levels of environmental control methods for various processes. During the appraisal for the first KuAz project, KuAz proposed a detailed Environmental and Social Action Plan (ESAP) in 2005 to mitigate the potential environmental and social impacts. KuAz will continue the implementation of the ESAP during the execution period of this project. Additional actions are also identified during the appraisal for this project, and incorporated into a supplemental ESAP. The previous IFC project with KuAz is also categorized as B.

Environmental and Social Mitigation Measures

Social and Environmental Assessment and Management Systems:

Land and natural environment:

KuAz manufacturing site is located in a large industry zone in Togliatti. KuAz and the nearby manufacturing plants were built in early 1960s. The residential communities are a few kilometers away at urban area of Togliatti. There is no natural protected area or protected species at or near the KuAz site.

- Environmental and social management and organization:

KuAz has a fully established EHS management system. The deputy chief engineer leads the EHS department and reports to the Chief Engineer and the General Director. The EHS department includes Control and Analysis Division, Environmental Division and Occupational Health and Safety (OHS) Division. In June 2007 a certification audit was conducted in KuAz for ISO 14001 and OHSAS 18001 certificates, as a result of which the company was recommended for certification by both ISO 14001 and OHSAS 18001.

Training, monitoring, and reporting: Required by its EHS management system, KuAz has various management programs and implementation procedures for its EHS training, monitoring, and reporting. KuAz has an established program to provide necessary training for all its employees in the field of environmental and social performances related to its operations. KuAz also conducts routine environmental, health and safety monitoring for its operations. In accordance with the supplemental ESAP, KuAz will improve and optimize its EHS data management and reporting programs to ensure that the management could get access to key updated data and information in time.

- Labor and Working Conditions:

Human Resources Policy and Management:

KuAz has made a commitment, as an employer, to consider the workforce as its most valuable asset. Therefore, KuAz has prepared an integrated Human Resource Policy that incorporates recruitment, training, and retention of employees. The policy includes strict adherence to the Russian Labor Code and implementation of a grievance committee to respond to any issues raised by the work force.

Worker’s Organization:

There is a labor union that complies with Russian legislation that represents almost 100% of the employees. The responsibilities of the union include: help with work relations; assistance with questions related to social benefits; reviewing issues related to safety compliance; support for retirement issues; reviewing wages scales and payments; representing employees in the event of hiring, lay-offs, or promotions; and, assisting in the grievance resolution. The union is responsible for ensuring that work is completed in accordance with the signed labor agreement to include all working conditions and social benefits.

Non-Discrimination and Equal Opportunity:

Hiring is conducted in accordance with the Russian Labor Code and there is a strict policy against discrimination based on gender, race, age or nationality. To this end, KuAz has a multinational labor force consisting of approximately 32 nationalities and minority groups. Of the workforce, approximately 57% are males and 43% are females.

Protecting the Work Force:

Protection of the work force in Russia is provided through legislation, in particular the Labor Code. The Labor Code was updated in 2006 to provide extensive protection for workers and ensure that a large array of social benefits must be provided by the company. KuAz complies with the Russian Labor Code and is audited on a regular basis by the Samara State Labor Inspection. The last labor audit was conducted in 2005. It is anticipated that the next labor audit (by government inspectors) will be conducted during 2007.

Additionally, work is governed by the Collective Labor Agreement, which is executed between the employer and the trade union representing all the employees. The Collective Labor Agreement provides for social benefits in addition to those stipulated under the legislation. . The Labor agreement also includes a grievance mechanism that is overseen by a Labor Committee consisting of equal representation of union representatives and company administrators. In 2006, there were two grievances filed by the union and both were resolved in favor of the employee.

Overall, employee satisfaction appears high with 100% of employees having a labor contract and the attrition rate within the company very high (92.4% for 2006).

There is no retrenchment anticipated for this project.

Occupational health and safety (OHS):

OHS Division leads the OHS works at KuAz. Operation safety is highly emphasized in the operation. All the employees are provided with adequate personal protection equipment and there are effective OHS procedures, which are strictly adhered to during operations. There are routine OHS trainings including annual refreshers for its employees. KuAz also records all the OHS accidents and monitors statistical trends for minor OHS accidents. KuAz has a comprehensive workplace noise and air quality monitoring program, which monitors 23 chemicals at nearly 300 monitoring locations. All the monitored parameters meet the local regulatory requirements and good international industrial practices, with the exception of benzene, which exceeds limit of the good international industrial practices at various benzene pumping stations. As stated in the supplemental ESAP, KuAz will increase the benzene pump maintenance frequency and increase the local ventilation system to reduce workplace benzene concentrations at benzene pumping stations.

Pollution Prevention and Abatement:

Raw materials and resource consumption: The major raw material and energy consumption rate at KuAz are water (20 million ton/y), benzene (132,600 ton/year), natural gas (1(109 m3/year), and electricity (1,000 GWh/y). The water is supplied by local government. KuAz has a corporate-wide energy saving program, which consists of reduction targets for each year and monitored closely by management.

Environmental Compliance:

KuAz generates two kinds of wastewater: low-contaminated wastewaters consisting of rain/snow water and discharge from waste water process in the amount of 24,000 t/d, which is discharged directly, without pre-treatment; and contaminated process wastewater in the amount of 1,200 t/d, which is pretreated onsite before discharged to local municipal wastewater treatment plant. Both discharged wastewater streams meet WBG/IFC guideline requirements, with the exception of pH from cleaning wastewater, which exceeds WGG/IFC guideline limit. KuAz has identified the ammonia storage areas as the source of elevated pH, and will isolate and treat this wastewater stream to ensure the pH in the liquid effluent meet WBG/IFC guideline limits. In accordance with the supplemental ESAP, KuAz will establish water-saving program with targets to reduce consumption of cleaning water.

The ambient noise and air quality conditions, meet both local regulatory requirements and WBG/IFC guideline limits. The monitoring air emission parameters at KuAz meet both local regulatory requirements and WBG/IFC guideline limits, with the exceptions of ammonia and soda dust from various processes, which exceed WBG/IFC guideline limits. As required in the supplemental ESAP, KuAz will propose a practical plan to mitigate the ammonia and soda dust emissions.

Solid and hazardous wastes:

KuAz generates various industrial solid and hazardous wastes from its production and demolition, including used catalysts, waste synthetic/mineral oils, construction wastes, metal scraps, etc. KuAz has a detailed management plan for these solid and hazardous wastes. All the wastes are properly stored onsite. Used catalysts are sent back to the manufacturers for regeneration; waste synthetic/mineral oils and other hazardous wastes are sent to government approved waste management company for recycle, treatment and disposal; metal scraps and other raw materials are recycled; construction wastes and other solid wastes are sent for recycle or to the government approved landfill for disposal.

Hazardous materials, operation hazard, and emergency response: KuAz’s raw materials, intermediate products, and most of the products comprise significant amount of hazardous materials. The manufacturing, storage, handling, and transportation of these materials pose serious dangers to the employees. The operation safety is always among the top concerns for KuAz management. There are on-going processes at KuAz to upgrade its various process safety management programs, emergency response, contingency plans, and hazard operability (HAZOP) study for the plant and associated operations to meet the requirements of the good international practices.

Green house gases (GHG):

KuAz generates approximately 2 million ton carbon dioxide (CO2) equivalence GHG per year from direct burning of natural gas for steam/heating, CO2 emissions from the natural gas to syngas reaction, and indirect generation from electricity purchase. KuAz has an on-going energy saving program to reduce GHG emission. At current stage, KuAz utilizes approximate 40% of the CO2 emissions from the syngas process for the urea manufacturing. KuAz has a plan to increase CO2 usage for urea and other products. In 2007 the Company’s Joint Venture expects to start-up a new food carbon dioxide production line.

- Community Health, Safety and Security:

Community health, safety and security: KuAz is located in a large industrial zone, and several kilometers away from the residential area of Togliatti. The routine operations at KuAz have limited direct impacts on the communities in Togliatti. The major raw materials of benzene and natural gas are transferred directly to KuAz site through railroad and pipeline, respectively. The products are also transported out of the site through the railroad system.

Emergency preparedness and response: KuAz has emergency response (ER) plans available and conducts routine drills for fire fighting and potential chemical explosion/releases. As stated in the supplemental ESAP, KuAz will provide material safety data sheet (MSDS) of its major raw materials and products to the local fire department and hospital, and conduct joint fire fighting and ER drills with the fire department and hospital officers.

Security personnel:

KuAz does not hire external agency for complex security. It has its own security personnel, which conducts routine ID check at the gates and security monitoring. The security personnel do not have any weapon. For serious security issues, KuAz reports directly to the local police station.

Stakeholder Engagement

KuAz complies with Russian requirements for public consultation and disclosure. As part of each project that must undergo state review (expertiza), a public meeting is prepared and environmental impacts associated with design change are publicly disclosed. Since 2006, there have been 3 public meetings to support production changes. Each consultation was announced one month prior to the meeting, material was provided to interested persons in a public location and on the town hall website, specific invitations were given to regulatory stakeholders, and minutes were taken and submitted for review as part of the state expertiza process.

Additionally, the company has a protocol for responding to public complaints. Each complaint is logged in a register and is responded to by the appropriate department. During the last 12 months, there has been one complaint registered and responded to by the company.

Location of environmental documents in locally affected community:

Environmental documents will be made available at Public Reception of the Togliatti City Administration at the following address:

4, Ploshchad’ Svobody
445000 Togliatti, Samara Region
Russian Federation

as well as on the company’s website: www.kuazot.ru.

To contact the project company, please write to:

Larissa Smoleva
JSC "Kuibyshevazot"
Finance Department
6, Novozavodskaya St.
445007 Togliatti
Samara Region, Russian Federation

Telephone: +7 8482 29-11-69
Fax: +7 8482 22-59-54
Website: www.kuazot.ru

Client Documentation

File Name	Actions
ESAP - KuAz II (final).pdf

**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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