26819 - Cukra Palm Oil

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Environmental & Social Review Summary

Project Number

26819

Company Name

Cukra Development Corporation, S.A.

Date ESRS Disclosed

Nov 5, 2008

Country

Nicaragua

Region

Latin America and the Caribbean

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Feb 23, 2009
Signed : Apr 24, 2009
Invested : Aug 25, 2010

Sector

Palm Oil

Industry

Agribusiness and Forestry

Department

Regional Industry MAS LAC & EUR

Project Description

The project will consist of the development of a greenfield palm oil operation in Nicaragua’s Atlantic coast by Grupo Numar (“the Sponsor”) from Costa Rica, one of the largest palm oil producers in Latin America. Grupo Numar plans to develop 11,500 ha of palm oil plantations and a 45 mt/hr extraction mill to produce Crude Palm Oil (CPO) for export.

Overview of IFC's Scope of Review

The review of this project consisted of a review of technical, environmental and social information submitted by the sponsor, interviews with company management and staff, and a site visits to the operations in eastern Nicaragua. The review also included an overview of the sponsor’s oil palm operations in Costa Rica, and a visit to their CPO mill and plantations in order to understand the corporate approach to the sector.

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 may 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
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management
- PS7: Indigenous Peoples
- PS8 : Cultural Property

The appraisal assessed the project against the above Performance Standards. All lands were purchased from legal owners, either individuals or companies, on a willing buyer/willing seller basis, so PS 5 Land Acquisition and Involuntary Resettlement has not been applicable.

This is a Category B project under IFC’s Policy on Social and Environmental Sustainability 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, design criteria, local regulations and industry certification schemes. Oil palm plantation development is occurring on existing, cleared agricultural land, and there is no destruction of or impact on critical habitat involved. Land acquisition is on a willing buyer-willing seller basis, and there is no involuntary displacement of any people. There are no indigenous peoples’ reserves in the area. The company is working to actively upgrade its environmental protection capabilities, and will ensure that its operations meet international standards for the sector. As a result, the Category B designation is appropriate.

Environmental and Social Mitigation Measures

The company has presented information which indicates that the proposed project will be developed to comply with IFC’s environmental and social requirements, including host country laws and regulations and IFC’s Policy and Performance Standards on Social and Environmental Sustainability, and the applicable environmental, health and safety guidelines. The information about how any potential impacts will be addressed by the Project is summarized in the paragraphs that follow. Specific actions to be taken by the Company to address environmental and social issues are listed in the Environmental and Social Action Plan (ESAP) which is attached to this document, along with deadlines specified for each action.

SOCIAL AND ENVIRONMENTAL ASSESSMENT AND MANAGEMENT SYSTEMS:

Environmental and Social Assessment. During the initial stages of development of the mill and plantations in the Kukra Hill area, the Company prepared and publicly disclosed an Environmental Impact Assessment to meet government requirements. This EIA was discussed at two public meetings in the project area. The ongoing development of further plantings does not require additional formal impact assessment, but the company ensures that environmental and social aspects are considered in the land preparation and development process. Further definition of procedures to handle impact assessments will be incorporated in the environmental and social management system.

Management System.

While Cukra has some of the basic aspects of a management system for environmental and social issues in place, it needs to formalize and further develop a comprehensive approach to enable it to effectively handle such aspects. Cukra will formalize its environmental, social and health and safety policies and will update and elaborate its existing written procedures, including clearly specifying staff responsibilities in these areas. Monitoring is currently carried out to meet government requirements, and this also needs to be further developed to provide an internal auditing function and to ensure effective feedback to management. Cukra will formalize its management system to be consistent with ISO 14001 and OHSAS 18001 standards. In addition, the Company will work towards developing a national interpretation of the RSPO Principles and Criteria with the intention of ultimately achieving certification to the RSPO standard for sustainable palm oil.

LABOR AND WORKING CONDITIONS:

Human Resource (HR) Policy and Management.

Cukra’s human resource practices follow Nicaraguan law, but need to be formalized in a clear policy statement which can be made available to all employees. Cukra currently has 1812 employees (83% men), of which 1236 are permanent and the balance are casual or contract labor. Employment is expected to increase as the plantation area expands and as newly planted areas come into production. Fifty percent of the workers live in dormitory-type housing, which is being upgraded to better quality. Construction of improved company housing for managers and supervisors is also planned. Worker pay rates are up to twice the Nicaraguan minimum wage, depending on the tasks involved, with harvesters getting the highest pay. The company also provides a food allowance, transportation from local towns, and medical care. In compliance with Nicaraguan Law, there is no prohibition of freedom of association. Although there are currently no unions, a workers’ association exists.

Cukra has identified the some incidence of child labor among its work force, mainly in cases where migrant families have brought these minors to the field because they do not wish to leave them alone in the labor camps. Explicitly following Nicaraguan Law, the company has registered and documented each of these cases and the Nicaraguan Ministry of Labor has come to provide specific best legal practice. The law permits those from 14 to 16 to work at certain light tasks (such as collecting loose palm oil fruit) for a limited number of hours per day. Mandatory schooling ends with primary school or 14 years of age in Nicaragua. As part of the ESAP, the client will review working conditions and hours and schooling opportunities to ensure that all children and parents take full advantage to further their children’s education and guarantee that there are no cases of harmful child labor.

The company will also inform any of its supply chain producers in their contracts, that they should also avoid any cases of harmful child labor as a condition of working with Cukra.

Occupational Health and Safety. Housekeeping in the mill and in supporting facilities for the plantation, such as the workshop and warehouses, needs further improvement, including addressing physical hazards (such as oily floors, exposed wiring, open floor drains), cleaning up litter, and ensuring the use of proper PPE (Personal Protective Equipment) by all workers. There is a company doctor on site, and additional medical facilities available at the clinic in Kukra Hill.

POLLUTION PREVENTION AND ABATEMENT:
Pollution Prevention, Resource Conservation and Energy Efficiency.

Steam and power are produced from one 15 T/hr boiler fueled with fiber, and there is one 750 KW diesel genset for backup. The existing boiler has no pollution controls fitted, and the particulate emissions (black smoke) visually exceeds IFC’s guideline. The company is planning on installing a new, 23 T/hr boiler by June 2010 which will have a multicyclone and heat exchanger. The company will be required to ensure that these emissions are brought into compliance with IFC guidelines within a timeframe to be agreed with IFC.

Process wastewater is pumped to an oil recovery pond, then to two oxidation ponds. Water quality of the final effluent from these treatment ponds has not been measured by the company, but is understood to exceed IFC guidelines. The company is examining options for improvement of wastewater treatment and will be required to ensure any effluents meet IFC guidelines for discharge to surface waters within a timeline to be agreed with IFC. Composting of EFBs is currently carried out, and the composted material has reduced their need for chemical fertilizer by 30%.

Pesticide Management. The company currently applies a range of commonly-used, relatively low-toxicity herbicides for weed control, especially early in the growing cycle before the canopy closes. The company has developed a modern facility for storage and mixing of pesticides and cleanup of equipment and worker washing facilities, but needs to further improve the use of PPE by workers and to formalize training and monitoring procedures.

COMMUNITY HEALTH, SAFETY AND SECURITY:

Community Health and Safety.

Company activities in growing oil palm and processing crude palm oil are not expected to result in significant impacts beyond the plantation boundaries, and will pose no dangers to neighboring smallholders or any communities in the region.

Security Personnel Requirements. The company works closely with the local police force, selecting and training local community members and working with local community watch committees. Guards are not armed but must have past military or police experience.

BIODIVERSITY CONSERVATION:

The region around Kukra Hill is a patchwork of mostly cleared agricultural land with some areas of scrub forest and some remaining gallery forest near rivers. All can be considered to be modified habitat as per Performance Standard 6. All of the oil palm development is occurring on cleared agricultural land, and the company avoids acquiring any forested land. The company is encouraged to protect any forest areas which remain on their properties, and ensure that government requirements for setbacks from rivers and other natural features are met.

INDIGENOUS PEOPLES:

The proposed plantations are not located near any indigenous reserves or indigenous communities, and no impacts related to PS 7 Indigenous Peoples are anticipated at the present time. There are some Indigenous Peoples who work for sub-contractors on land development, and the company has assigned a full-time staff member to ensure that they are properly treated and their needs are met. In future, if the company acquires land near or adjacent to any indigenous reserves, the company will ensure that any issues that arise are handled properly and in compliance with PS7 requirement.

CULTURAL PROPERTY:

The company has identified one archaeological site on their property, and this has been properly set aside and is being excavated by archaeological specialists. Most oil palm developments result in little land disturbance, but the company will prepare a basic “chance finds” procedure for inclusion in their operations manual as part of their environmental and social management system.

Stakeholder Engagement

The company has had a major impact on the development of the region, being the largest employer and generating 70% of the tax revenues for the Kukra hill regional municipality. The company has built 30 km of road to connect to Rama and the national road network, which has had a major effect in opening up the Kukra Hill area. The company has good relations with all the neighboring communities, and has provided teachers for the elementary schools along with a variety of assistance to the local government. The company also contributed to the construction of buildings for a market, bus terminal, clinic and municipal office, and has provided 40 ha of land for town expansion for 540 house lots. Up to 50 smallholders have been provided with technical assistance to enable them to develop their own small oil palm plantations, and this popular program is expected to expand. These actions have all provided significant economic stimulus for this traditionally poor and isolated area of the country. The company has persuaded the first Nicaraguan bank to open up an office in the town. The company is also trying to stimulate the local economy to provide local jobs, working with local women’s groups to sew company uniforms and make handicrafts with local materials for sale.

The company meets regularly with municipal officials to discuss development issues. In addition, questions or complaints from the community are handled through the municipality’s office of citizen participation. Regular meetings are also held with community committees that include respected members of local communities.

Environmental & Social Action Plan

Title	Anticipated completion Date
Development and implement a comprehensive environmental and social management system (ESMS) to meet IFC requirements.Hire a contractor to provide technical support in achieving independent certification to ISO 14001 and OHSAS 18001 standards (or their equivalent)	08/25/2010
Development and implement a comprehensive environmental and social management system (ESMS) to meet IFC requirements.Achieve independent certification to ISO 14001 and OHSAS 18001 standards (or their equivalent).	10/24/2011
Prepare a formal, written human resources policy statement, which covers rights and responsibilities of all workers, including worker grievance procedures, specific company requirements regarding child labor (specifying a time frame to phase out legal hiring of those between 14 and 17), working hours, forced labor, and discrimination, and collects all existing human resources procedures the company has developed separately, and ensure that this is distributed to all employees.	12/31/2009
For those between the ages of 14 and still not yet 18 that are legally part of the workforce, carry out an analysis of working conditions and hours and schooling opportunities available, and ensure that all children are not working hours or jobs that could affect their health and opportunities for school. The objective is to, over time, eliminate any reasons for these under 18 years old to be in the workforce.	12/31/2007
Completion of study and copy sent to IFC	06/30/2009
Based on the above study, for any cases where children cannot attend school, the company will develop and implement a time-bound action plan to provide transportation to schooling.	09/30/2009
Cukra will amend the contract for its palm oil third-party producers such that Cukra will only buy from producers that adhere to national law in terms of both permits to clear new land and to avoidance of cases of harmful child labor as a condition of working with Cukra.	06/30/2009
Prepare a comprehensive Pesticide Management Plan (including explicit written procedures, requirements for use of PPE, training programs, and monitoring and reporting requirements) and provide plan to IFC	12/31/2009
Prepare management system procedures summarizing pest management activity, responsibilities, and associated information including Integrated Pest Management (IPM) programs.	03/31/2010
Carry out a study of boiler emission dispersion and potential impact on community health, and agree with IFC on an appropriate emission limits and timetable forimplementation of agreed measures.	03/31/2015
Liquid effluents - Develop a plan, for IFC’s approval, to upgrade the effluent treatment system in order to comply with IFC General EHS guidelines for pH, BOD, COD, Total Suspended Solids (TSS), Total Nitrogen and Total Phosphorus. This plan will include specific actions, responsible people, budget and timeline.	06/30/2015
Implement Wastewater mitigation programs	06/30/2015
Prepare a “chance finds” procedure for any cultural heritage sites or artifacts, to beincluded as part of the company’s operational procedures manual	12/31/2009
Develop a Land Acquisition Protocol which spells out the procedures the company follows to ensure that all land acquisitions are fair, legal, and adhere to willing-buyer, willing-seller principles	12/31/2009
External Communiation. The Company will formalize its process to deal with external queries, concerns, and grievances and a means to disseminate it formally (posting at company offices and at community meetings) and included in relevant written public communications	10/24/2009
Occupational Health and Safety. Carry out a study of occupational health and safety in the mill and in supporting facilities for the plantation, identifying fire prevention and control needs, physical hazards (such as oily floors, exposed wiring, open floor drains), housekeeping, and use of PPE, and specify a plan and schedule for addressing deficiencies.	02/25/2011
Implement the plan and provide report to IFC documenting results and findings	08/25/2011
Sustainable Management Certification. Apply for and obtain RSPO (Roundtable on Sustainable Palm Oil) ertification for sustainable oil palm plantation management	06/30/2015
Sustainable Management Certification. Apply for and obtain RSPO (Roundtable on Sustainable Palm Oil) ertification for sustainable oil palm plantation management	06/30/2015

Client Documentation

File Name	Actions
Cukra ESAP final November 3.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.

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