27465 - Avtokran

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Environmental & Social Review Summary

Project Number

27465

Company Name

AVTOKRAN, OAO

Date ESRS Disclosed

Sep 4, 2009

Country

Russian Federation

Region

Europe

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Dec 2, 2009
Signed : Dec 9, 2009
Invested : Dec 30, 2009

Sector

Agriculture, Construction, and Mining Machinery

Industry

Manufacturing

Department

Regional Industry MAS LAC & EUR

Project Description

The project is to assist Avtokran Joint-Stock Company (“Avtokran” or the “Company”), Russia’s leading producer of truck mounted cranes, to complete its modernization program for 2008-2010 and partially refinance its short term debt (the “Project”). IFC will support the modernization, capacity optimization and environmental improvements of Avtokran’s two main production sites located in frontier regions, which will allow the Company to: (i) further penetrate the Russian and CIS markets, (ii) diversify into higher value added products, and (iii) upgrade product quality and emission standards.

Avtokran has requested IFC and EBRD to provide loans to assist the Company with the financing of the Project. The Company has an existing relationship with EBRD.

Avtokran is the largest machine-building plant in Russia producing truck mounted cranes, with hoisting capacity of up to 100 tons, and is the only producer of 100-ton truck mounted cranes in Russia. Avtokran has full cycle of mechanical operations including foundry, press-forging, mechanical-treating, welding, assembling, and painting.

Overview of IFC's Scope of Review

IFC’s environmental and social review of this project included visits to Avtokran (“the Project” and located in the town of Ivanovo, Ivanovo Region) and GazpromKran (a minor part of the project located in the town of Kamyshin, Volgograd Region); review of information provided in response to IFC’s social and environmental questions, discussion about corporate environmental, health, safety and social management system with corporate management held in Moscow headquarters and supported by follow up discussions on selected issues.

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 (“PS”):

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

The following Performance Standards were screened for but not found relevant for the actual project:

PS5: Land Acquisition and Involuntary Resettlement as the current project is carried out within the existing plant area.
PS6: Biodiversity Conservation and Sustainable Natural Resource Management as the Company has no involvement in natural resource operations.
PS7: Indigenous People as the current project is carried out in a developed urban area and there are no indigenous people around the project sites.
PS8: Cultural Heritage as all land used by Avtokran has been converted to industrial uses for decades.

Based on the planned use of internationally recognized design and equipment suppliers, and the upgrades taking place within the existing facilities, this Project is a Category B project according to IFC’s environmental and social review procedure, because potential adverse social and environmental impacts are limited and readily mitigable.

Key environmental, health and safety and social (EHSS) impacts/issues of the project include:

- Vertically integrated environmental, health and safety (EHS) management system;
- Occupational health and safety (OHS) housekeeping;
- Air emissions;
- Water management and wastewater treatment;
- Waste management and;
- Community health and safety.

Environmental and Social Mitigation Measures

The Company has presented plans to address these impacts to ensure that the Project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and IFC’s Policy and Performance Standards for Social and Environmental Sustainability and applicable Environmental, Health and Safety Guidelines. The information about how these potential impacts will be addressed by the Project is summarized in the paragraphs that follow.

PS1: Social and Environmental Assessment and Management Systems:

Avtokran is currently relying on the legally required management systems, which focus on systematic and consistent monitoring and recording of EHS performance parameters as well as availability of appropriate permits and licenses, but are rather scarce in stipulating continuous improvement actions. However, the Company management has been undertaking feasible efforts for addressing key EHS issues by planning and implementation of the Company’s program that incorporated a number of environmental actions proposed by EBRD for providing a loan to the Company in 2006.

Avtokran management are aware of the need to improve the corporate EHS management system to bring consistency to its operating standard, and are committed to establish sound EHS management systems consistent with international standards ISO 14001 and OHSAS 18001, and IFC’s General EHS Guidelines. This is presented in more detail in the attached Environmental and Social Action Plan (ESAP), which describes actions to ensure that both corporate and Avtokran operations meet international best practice. Apart from actions described in the relevant sections of this document, it includes:

a) Appoint a suitably qualified corporate Environmental, Health & Safety Manager at the corporate level.

b) Develop and implement the corporate EHS Management System that incorporates objectives and measures for achievement of the objectives; EHS performance indicators to measure progress, and indication of responsibilities and implementation time for each action.

PS2: Labor and Working Conditions:

- Human Resources Policy, Terms of Employment and Workers’ Organizations:
Avtokran adheres to the national labor laws. These laws specify rights and responsibilities of an employer and employees, guarantees employees’ rights for labor protection, and are generally consistent with the International Labor Organization’s core labor standards and IFC’s Performance Standard 2.

The majority of employees belong to the trade union which represents members'' interests to management and ensures labor laws are followed. The collective agreement addresses terms of employment and dismissal, working conditions, grievance mechanism, wages and benefits. The collective agreement is re-negotiated between management and the representatives of trade unions on regular basis.

- Retrenchment:
A retrenchment took place between May and August, and this was fully compliant with Russian legal requirements. Completion of the ongoing modernization will likely entail the reduction of the number of employees involved in main operations. However, Avtokran is committed to mitigate the impacts on employees and will develop and implement a Plan which will include but not be limited to the training for new professions and/or providing compensation to retrenched personnel.

- Occupational Health and Safety:
Avtokran OHS management system is designed to address national legal requirements. It includes multilevel internal inspections, recording of accidents and incidents, reporting to the local supervisory authority, medical examination of employees, monitoring of working environment, providing needed personnel protective equipment (PPE) in accordance with regulatory standards.

The company has improved the OHS conditions by installation of mobile ventilation units at the selected work places and arranging health & safety attestation of workplaces. The replacement of machinery by modern equipment from international recognized producers as part of the project will reduce heavy manual work, recurrent movements of workers and improve air quality at the workplaces and workshops.

The Company management is committed to improve OHS standards by broadening of the requirements for the use of PPE through continuous improvement of health & safety culture. This will be achieved through development and implementation of OHSAS 18001 in accordance with the attached ESAP. The knowledge base within Avtokran will be broadened by training for corporate and Avtokran top management on international OHS Codes of Practices and IFC’s EHS Guidelines.

The safety tracking system is well established. Avtokran safety data showed 3.95 and 2.64 Lost-Day-Accident/Million-Man-Hours (LDA/MMH) in 2007 and 2008 respectively. This is within normal experienced performance. Avtokran has a Plan for Emergency Response in place.

PS3: Pollution Prevention and Abatement:

- Air emissions:
The main contribution to the total emission is from volatile organic compounds and particulate matters. Main sources of emissions are two Electric Arc Furnaces, painting and welding shops, gas-fired boiler and local exhaust ventilation from the production shops for mechanical operations (cutting, bending, cold pressing/stamping, forging, thermal/heat treatment, etc.).

About 40% of all air emission sources are equipped with exhaust gas abatement equipment. Air emission monitoring data have shown exceeding of the limits of particulate matters and manganese. Therefore the reducing of air emissions is high priority in Avtokran environmental management. To address this issue Avtokran is implementing a program for air emission reduction and the progress of this program, including achieving compliance with IFC guidelines will be followed closely based on the ESAP and monitoring reports. The Company is considering options for phasing out and outsourcing of foundry operations that will improve working and ambient conditions for workers and population of the adjacent areas correspondingly.

The estimated greenhouse gas (GHG) emissions amount about 47 000 tons CO2 equivalent per year. The Company will consider options for monitoring and further reduction of GHG emissions if this appears feasible and will report annually on the progress to IFC.

- Water consumption and wastewater management:
Water of potable quality is supplied from the municipal mains, and water of “technical quality” is supplied from own underground water well. Avtokran has a water efficiency program in place that incorporates closed water loops for cooling of production equipment; development and implementation of organizational structure for monitoring of water consumption and wastewater discharge in the production shops; improvement of schedule for stop valves repair; installation of new water meters, etc.

There are on-site wastewater treatment plants for treatment of process wastewater effluents and oil products. Common waste is removed by trucks to a public landfill (operated by specialized company) and pre-treated process effluents are discharged to a municipal wastewater treatment plant.

Monitoring of selected samples of treated process wastewater revealed past exceeding of the limits for metals and oil products specified in the agreement with the municipal agency for receiving of Avtokran wastewater into the municipal waste water treatment system. This deficiency has been addressed by installation of a post-treatment unit for achieving limits for metals and oil products.

Avtokran also has an opportunity for improvement of its water use efficiency by recycling to reduce its current water consumption and discharge. Avtokran’s management has agreed to undertake a preliminary estimation of water recycling options and further implementation within development of the EHS management system if this appears feasible.

- Waste management and hazardous material handling:
Types and classes of hazardous waste generated by Avtokran are identified and regularly reported to the authorities, which issue permits for waste disposal. Avtokran has agreements for waste removal from the site utilizing specialized contractors. Metal scrap is collected separately and sold for recycling. Hazardous materials used by Avtokran include epoxy resins, organic solvents, acids, paints of which about 40% are water based. Avtokran does not use asbestos containing materials.

- Ground contamination risk:
Avtokran’s operations started in 1948-49. A survey undertaken in 2006 estimated soil contamination by oil products and metals (zinc, copper and lead) as being within the permissible levels for residential areas based on national regulations. The risk of serious soil contamination from past operations is thus considered minimal.

- Emergency Preparedness and Response:
Avtokran facilities are equipped with life and fire safety (L&FS) systems selected to be appropriate for the most likely risks. The adequacy of the maintenance of the L&FS systems is controlled on a regular basis by the authorities. Regular OHS training is in place.

According to national legal requirements an Emergency Response Plan (ERP) has been developed; it addresses the training, resources, responsibilities, and communication and response activities.

PS4: Community Health, Safety and Security

Since Avtokran is located in the southwest part of the town of Ivanovo within an industrial zone, reduction and prevention of air emissions of volatile and particulate matters is a first priority of Avtokran environmental management. The company is undertaking feasible efforts for maintenance of abatement equipment and replacement of obsolete facilities with new ones. The stacks of the press-forging workshop are equipped with cyclones. Moreover ongoing reconstruction through implementation of modern technology, installation of modern equipment from internationally recognized producers and upgrading of plant designs will result in improvement of the ambient air quality, energy efficiency and community health and safety.

Stakeholder Engagement

Avtokran is among of the largest employers in the town of Ivanovo. Avtokran has been sponsoring veterans’ and nongovernmental youth organizations in Ivanovo, an orphanage; selected city events; and has been organizing various social activities for employees and their families, e.g. sporting competitions, and subsidized holidays of schoolchildren in summer camps in close cooperation with local educational institutions, etc.

Avtokran publishes information about its operations and activities in local mass media. Avtokran will now establish methods for communicating environmental and social aspects of current operations and maintain procedures for receiving, documenting and responding to concerns from any external interested parties relating to the project as a part of the EHS management system being developed.

Client Documentation

File Name	Actions
Avtokran ESAP.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.
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