27059 - Evrotek

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Environmental & Social Review Summary

Project Number

27059

Company Name

EVROTEK GROUP PLC

Date ESRS Disclosed

May 12, 2008

Country

Ukraine

Region

Europe

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Aug 8, 2008
Signed : Oct 3, 2008
Invested : Nov 5, 2008

Sector

Retail (Including Supermarkets, Grocery Stores, etc.)

Industry

Tourism, Retail and Property

Department

Regional Industry MAS LAC & EUR

Project Description

Evrotek (Evrotek or the Group) is a start-up supermarket retail chain group that currently operates 4 stores and intends to expand to a total of 58 stores located in 25 regional cities throughout Ukraine over the next two years.

The project involves:

- creation of a modern food retail chain under the brand name “Fresh”
- development of up to 58 new stores (23 mini-hypermarkets and 35 supermarkets); and
- construction of 4 logistic centers.

All stores will be constructed on the greenfield sites. Total project cost is estimated at $450 million. The proposed IFC investment an equity investment of up to $20 million and a subordinated C loan of up to $55 million.

Overview of IFC's Scope of Review

The environmental and social review of the project included desk review of information provided by the company in response to social and environmental questions; interviews with company’s experts; and follow up discussions with the Group. The information available at the time of appraisal and reviewed by the IFC included environmental assessment of the site in Krivoy Rog, minutes of public consultation with local communities in Krivoy Rog, environmental action plan for the store in Kerch; company-wide policy on utility savings; and collective bargaining agreement.

Environmental specialist also relied on the opinion of IFC’s industry specialist, who visited Evrotek’s stores in Krivoy Rog and Kerch.

E & S Project Categorization and Applicable Standard

While all Performance Standards (PS) 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

New sites will be chosen on the basis of proximity to residential areas, major roads and transportation routes, and therefore highly unlikely that issues related to biodiversity conservation, cultural heritage or indigenous peoples will arise.

The key environmental and social aspects of the project, which have been considered are the following:

- Environmental assessment and site planning processes;
- Social and Environmental management systems and structure;
- Labor and working conditions;
- Resource efficiency;
- Refrigerant selection;
- Emissions to air and water;
- Solid waste disposal and management;
- Life and fire safety;
- Food hygiene;
- Site acquisition.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because the project has limited potential adverse environmental and social impacts that are few in number, site specific and readily mitigated.

Environmental and Social Mitigation Measures

Key environmental and social issues are summarized in the paragraphs that follow. Evrotek and IFC have agreed on the Environmental and Social Action Plan (ESAP) to ensure that the Project, upon implementation of the specific agreed measures, will comply with the host country’s laws and regulations, and IFC’s environmental and social Performance Standards (PSs). The ESAP forms an integral part of the ESRS.

- Environmental Assessment and Planning Processes (PS1):

All stores and logistic centers will be constructed on the greenfield sites. Project developers are responsible for carrying out an environmental and social impact assessment (ESIA) study of the proposed development and to develop environmental action plans. The Group does not have in-house experts to carry out ESIAs and outsources this work to local external consultants. Positive opinion of the state environmental regulators on the conclusion of the ESIA is necessary to commission the construction.

Environmental action plans typically include utilities saving measures, wastewater management; mercury lamps management and others.

- Social and Environmental Management:

The company has a formal environmental and occupational health and safety (OHS) management structure and expects subsequently to expand the team as operations grow. The Group is implementing a corporate approach towards environmental, social, health and safety (ESHS) management to provide support to individual stores on environmental and social aspects of project development and operation, and ensure consistency across subsidiaries. The company is planning to achieve ISO 14001 certification by 2011.

- Labor and Working Conditions:

As of appraisal date, there were 200 employees in the Evrotek’s headquarters in Kiev and 600 people in operation. It is expected that the Project could generate up to 7,000 new direct work places. Most of the employees will be hired locally.
Presently, the corporate HR group consists of 17 specialists, who are supported by HR managers on the store level.

The Group has adopted a number of internal Standards and Codes on Human Resources Management. These documents are consistent with the Labour Code of Ukraine and include written terms of employment and termination, disciplinary practices, working conditions, opportunities for professional development, grievance mechanism, social guarantees and others. Each employee is familiarized with these documents during the hiring process.

The shortage of qualified personnel with experience to fill top positions and a high turnover (9.3 % per month for low level positions) is becoming increasingly common for Ukrainian retail market because of increased competition. In order to attract good quality employees and retain those already employed, Evrotek has instituted a bonus incentive system related to observable performance indicators.

In 2007, at early stage of its development, the Group has signed first Collective Bargaining Agreement with the representatives of employees, which specifies social and other guarantees to employees in addition to Labour Code of Ukraine. Going forward, the Group will develop effective mechanism to regularly discuss and negotiate the conditions of joint agreement with enlarging number of employees.

The Collective Agreement provides for the possibility for employees to raise workplace concerns but no supporting procedures exist at the moment. The Group will support the existing grievance mechanism by developing a procedure on how employees can get access to the management, how raised concerns will be considered and how feedback will be provided to protect the confidentiality of employees.

In order to minimize the social risks associated with construction of new premises, Evrotek includes certain requirements in a construction contract with a contractor obliging the latter to adhere to local Labor and Occupational Health and Safety (OHS) laws which are consistent with PS2 requirements. Such requirements typically include OHS requirements, healthcare and sanitary conditions for on-site labor force; and living conditions for non-local labor force. Evrotek is undertaking regular supervision visits to construction sites to monitor implementation of these requirements.

- Resource efficiency

Energy represents a significant expense in the retail industry and one which the company wishes to control closely.

The Group is in the process of developing a company-wide utility management system. At the moment, it includes a corporate-wide policy to promote efficient use of utilities; equipment of stores with electricity, water and natural gas (NG) meters; implementation of utility savings projects, such as heat utilization from refrigeration compressors to pre-heat sanitary water and, thus, reduce NG consumption. Going forward, the Group will develop utility consumption targets and monitor its achievement through regular utilities consumption reports from individual stores.

- Refrigerant selection and use

Non ozone-depleting refrigerants R404 and R507 are used in the stores’ refrigeration systems.

- Air emissions

Typically, the Group is using small NG-fired boiler plants for internal heating. Diesel generators are used only as back-up option in case of electricity supply failure. Evrotek will monitor all sources of air emissions as part of the ESHS management system to ensure compliance with local requirements and IFC’s guidelines. The company will provide monitoring data to IFC in the Annual Monitoring Report and will take corrective measures in case of registered exceedances.

- Waste water disposal

The company discharges waste water from the stores to the municipal sewage network. Evrotek is installing pre-treatment systems to reduce oil and grease concentrations from kitchen.

- Solid waste management and disposal.

Some solid wastes, in the form of damage goods and time-expired food products arise in stores. These are collected and disposed of by an authorized waste management company. Other solid wastes, such as paper and cardboard, and plastic packaging materials are collected and sold for recycling.

- Life and fire safety

Life and Fire Safety (L&FS) is the part of the overall EHS management system. Evrotek is building stores with floor areas of 1300 or 2400 m2. Store design plans include generic fire protection facilities required by local building codes and fire regulations for a building of this size: fire suppression, fire detection and alarms, multiple unobstructed exit routes, emergency exit signage and lighting and emergency response plans. Staff training and routine inspection are carried out periodically on a store-level. To ensure that existing properties are equipped consistently with internationally recognized Life Safety and Fire protection Codes, such as NFPA, the Group will commission a fire safety professional to review a corporate L&FS Master Plan. This Master Plan will contain guidance on how to adapt the generic L&FS-related aspects according to individual store circumstances.

- Food Hygiene

Evrotek prepares and sells some fresh food stuffs. Food hygiene is consistent with Ukrainian sanitary regulations.

- Site acquisition and planning processes

Evrotek is acquiring land plots for development of stores or logistics facilities through long-term lease agreements. The purchases for 4 existing stores were on willing buyer, willing seller basis, and did not cause physical or economic displacement.
At Kherson, Evrotek has reached agreement with local authorities that it will rehouse with title remaining inhabitants of a run-down apartment building which was condemned as unfit for human habitation in the 1980s. On completion of this process, Evrotek will take over and will be permitted to redevelop the land. This agreement will complete the rehousing of the inhabitants of this structurally unsound building which started in the 1980s but was suspended during the 1990s due to lack of funds.

Agreement on this process was reached between Evrotek, the local authority and the building residents in late 2007, this agreement following a number of public meetings describing the process. Key points of this process are: that Evrotek will rehouse building residents, in replacement apartments with, relative to their existing accommodation, enhanced standards of accommodation and with title. Evrotek will finance replacement accommodation and all moving costs. This process has continued through 2008; at the time of writing occupants of 21 apartments had been rehoused, and occupants of 6 apartments were awaiting rehousing, though agreement with five of these groups had been reached. This process is consistent with Performance Standard 5.

Going forward, the company will develop policies and implement land acquisition procedures consistent with IFC Performance Standard 5 “Land Acquisition and Involuntary Resettlement”. All land to be purchased will be examined for contamination, and either avoided or appropriate safeguards adopted in the event that contamination is identified.

Stakeholder Engagement

Public consultations with the local communities to discuss environmental and social aspects of the future development are the integral part of the ESIA process in Ukraine. Communities’ support of the project is required for positive opinion of state regulators. Evrotek is developing neighborhood stores, and therefore its business success relies upon creating and retaining the goodwill of its neighbors. Design of stores typically includes landscape development of the adjacent area, playing areas for children, etc. Environmental action plans are available upon the request at each store.

The “Book of Suggestion and Complaints” is held in each store to receive comments from members of the public. These comments are studied and acted upon by the company’s senior management.

Client Documentation

File Name	Actions
Evrotek ESAP September 2008.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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Environmental & Social Review Summary

Project Description

Overview of IFC's Scope of Review

E & S Project Categorization and Applicable Standard

Identified Applicable Performance Standards

Environmental and Social Categorization and Rationale

Environmental and Social Mitigation Measures

Environmental and Social Mitigation Measures

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Stakeholder Engagement

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