27135 - PIKVrbovec&Belje

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Environmental & Social Review Summary

Project Number

27135

Company Name

PIK VRBOVEC-MESNA INDUSTRIJA d.d.

Date ESRS Disclosed

Apr 29, 2008

Country

Croatia

Region

Europe

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 4, 2008
Signed : Jun 5, 2008
Invested : Jul 31, 2008

Sector

Animal Slaughtering and Processing

Industry

Agribusiness and Forestry

Department

Regional Industry MAS LAC & EUR

Project Description

This project involves the completion of the restructuring of PIK Vrbovec and of Belje, a leading slaughterhouse and meat processing company, and an associated 20,000 ha farm complex, respectively. The project includes an increase in working capital for the two companies, as well as financing of the ongoing expansion of the slaughterhouse capacity at PIK Vrbovec and Belje, replacement of existing factory buildings and warehouses, and additional financing for the municipal sewage system.

Overview of IFC's Scope of Review

The review of this investment consisted of a desk review of information provided by the company, including their annual monitoring reports on the previous investment. As this is an existing client, the review was informed by the site visits during the earlier appraisal (March 2006) and a recent supervision visit (November 2007). A further field visit is planned, to be carried out prior to disbursement.

IFC’s review included the following topics: performance against requirements in the earlier IFC investment; development and implementation of integrated management systems encompassing quality, environmental and social affairs; animal husbandry and disease control; food safety; emissions to the environment (air, wastewater and solid waste, odors, and noise); clean production and eco-efficiency in processing operations including minimization of water use and wastewater production, recycling, and efficient use of energy; management of hazardous materials and hazardous wastes; occupational health, safety and emergency response; life and fire safety; and social issues along with community development.

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 acquisition of land involved, and there are no indigenous peoples in the area which is affected. The processing premises and farms are all cleared industrial or agricultural land, and there are no significant biodiversity issues, nor any known cultural heritage sites. Performance Standards 5 through 8 therefore do not apply at this time.

This is a category B project according to 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 or design criteria. The scope of the company’s operations and their five-year development plan were reviewed in detail during appraisal of the existing project (Croatia: Agrokor: 24442). The current investment provides further funding to continue the program, and does not include any significant new physical developments. The client has made good progress on the majority of items on the Corrective Action Plan defined for the earlier project which have already come due, with official waivers granted for those which are still to be completed. The current ESRR for the project is B2-Average, and the company has submitted AMRs in a timely fashion. The B category is therefore appropriate for this continuing investment in an existing client.

Environmental and Social Mitigation Measures

The company has provided appropriate information on its current practices and procedures to address environmental and social risks and impacts to ensure that the proposed investment currently complies or will, upon implementation of specific additional agreed measures, comply with host country laws and regulations and the IFC Performance Standards on Social and Environmental Sustainability and environmental and health and safety guidelines. Information about how these potential impacts are or will be addressed by the sponsor is summarized in the paragraphs below. The existing Environmental and Social Action Plan for the original investment will be carried over into this current investment.

- Integrated Management Systems:

PIK Vrbovec and Belje have made significant progress in implementing comprehensive environmental and health and safety management systems throughout all their operations. Agrokor has a comprehensive Environmental Management Policy which applies to all business units and requires the establishment, maintenance and improvement of environmental management systems to meet international standards. The Agrokor Group has also adopted a long-term Environmental Protection Strategy for 2007-2015 which serves as a blueprint for implementation of their sustainable development policy.

PIK Vrbovec and Belje have achieved certification for all their operations to meet HACCP, ISO 9001 and ISO 14001 standards. Certification to OHSAS 18001, for health and safety management systems, is expected by the end of 2008. In addition, the farming operations at Belje have received GlobalGAP certification for farm management practices. The integration of these systems forms an exceptionally comprehensive approach for management of environmental and social issues. Agrokor is an active member of the Croatian Business Council for Sustainable Development, which promotes sustainability, sharing of experience in protecting environmental quality, and public involvement, and also works closely with other environmental protection organizations in Croatia, both governmental and NGOs.

IFC’s ongoing supervision of the PIK Vrbovec and Belje investments will focus on the internal and external audit reports on their management system certifications, as well as adherence to their internally-set annual targets and objectives which form part of these management systems.

-Labor and Working Conditions:

PIK Vrbovec and Belje, as part of the Agrokor group, follow the comprehensive human resource policy developed by Agrokor, which is applied to all business units in the group. The two companies have 3940 employees, with 68% being men. Staff turnover is very low, as the Group is considered to be the premium employer in Croatia, providing strong training programs, opportunities for advancement, and good pension and retirement programs. There are two independent unions which represent workers, and there are collective agreements freely negotiated with both. The company meets with the unions weekly and they are informed of corporate strategy. There have been no strikes or lockouts since the agreements with the unions were formalized in 1996. Since 2005 (when Belje was acquired ) , there have not been any retrenchments, other then voluntary retirements and redundancies handled in accordance with the Collective Agreement between the company and the Syndicates and in accordance with the Croatian legal requirements. This was handled carefully as the company is aware of its social responsibilities in this area where unemployment is approximately 30%. Contract employees are treated the same as full-time employees as per the human resource policy. The minimum age for employment is 18. A feature of Agrokor’s human resource approach is the Agrokor Academy, which provides comprehensive training programs for employees as well as specialized programs and post-graduate education at national and foreign universities and institutions. The company’s human resource policy and procedures fully meets IFC’s Performance Standard 2.

-Pollution Prevention and Abatement:

During the period of IFC’s initial investment in PIK Vrbovec and Belje, these companies have substantially improved their management of air and wastewater emissions and solid wastes. Dust emissions from the Belje flour mill and the animal feed mill were a concern to the local community, and Belje has now redesigned its processes and new equipment is expected to be installed by end September 2008 to eliminate these issues. A new slaughterhouse at Belje is expected to start construction in 2009, and this has been designed to meet Croatian and EU norms for air and water emissions, which are more stringent than IFC guidelines.

PIK Vrbovec slaughterhouse currently discharges wastewater to the public sewage system under a water management permit valid until 31 December 2010, while a combined treatment plant for PIK Vrbovec and municipal wastes is constructed. There have been some delays due to coordination among public sector bodies involved, but this work is now underway and completion of the sewage collector system is expected by end 2008 and the treatment plant by end 2009. When completed, discharges will be fully compliant with Croatian and EU norms as well as IFC guidelines.

Solid wastes from farming operations are all composted or otherwise treated and returned to the land as a soil amendment. Solid wastes from the PIK Vrbovec slaughterhouse are all handled appropriately by third-party contractors.

-Community Health and Safety:

Food safety is assured through the implementation of the HACCP system in all operations. All operations, particularly animal husbandry, are subject to comprehensive bio-security arrangements, to ensure against the spread of disease. The companies have appropriate emergency procedures in place to ensure that there are no significant risks to local communities from their operations.

Belje has also implemented improvements in animal welfare practices which meet the strict EU requirements as well as the Croatian law on animal welfare.

Stakeholder Engagement

The Agrokor Group has a strong commitment to corporate social responsibility, and supports a wide variety of social, athletic, educational and cultural groups and events, across the country and throughout the year. Both PIK Vrbovec and Belje, as members of the Group, sponsor a number of athletic clubs in their areas including football, basketball, wrestling and volleyball clubs. Both also provide post-graduate scholarships as well as supporting schools and school events. The Group has a program of public dissemination of information on its companies, including TV and newspaper reports and the web sites of PIK Vrbovec and Belje.

**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

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E & S Project Categorization and Applicable Standard

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