27869 - Kulon Yugros

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Environmental & Social Review Summary

Project Number

27869

Company Name

KULON YUGROS, ZAO

Date ESRS Disclosed

Jul 6, 2009

Country

Russian Federation

Region

Europe

Last Updated Date

Jun 29, 2022

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Oct 5, 2009
Signed : Oct 12, 2009
Invested : Jun 30, 2010

Sector

Storage (Including Agricultural Products)

Industry

Infrastructure

Department

Regional Industry INF LAC & EUR

Project Description

This greenfield project involves the construction and operation of a Class A warehouse facility of approximately 55,000 sq. m, including office premises, necessary auxiliary facilities and communications, designed for storage of consumer goods at ambient temperature. The facility is operated by ZAO Kulon-Yugros (“the company”), and located near the town of Mineralnye Vody, Stavropol region, a southern region of the Russian Federation, Russia. The project will be developed in two phases. Phase I including construction of warehouse and office facilities with a footprint of 28,000 sqm; and Phase II including the construction of a warehouse facility with an additional footprint of 27,000 sq. m.

The company is a 50/50 joint venture between Espro Group (former IFC client – Kulon Project # 20337) and Meridian-B, a Russian construction company. Espro Group (the “sponsor”), a leading sponsor in the Project, is a well-known to IFC. IFC invested US$7.5 million in the Kulon project involving the construction of two warehouse facilities in Moscow and the Moscow region in 2004-2005.

Overview of IFC's Scope of Review

The environmental and social review of the project included a visit by an environmental consultant on behalf of IFC to the headquarters of Espro Group (the “sponsor”) in Moscow in May 2009, where there was a discussion of the corporate environmental, social, health and safety (ESHS) management system and ESHS aspects of the new Kulon Yugros (“the Project”) warehouse. The consultant visited Moscow-based Baltia and Istria warehouses operated by the sponsor and the actual construction site of the Kulon Yugros warehouse located near the town of Mineralnye Vody, Stavropol region of the Russian Federation, where meetings with management, tenants and construction contractor were held. The consultant has also reviewed environmental and social documentation and information provided by the sponsor, including Project Assessment Information; permits issued by local construction and environmental regulators; company’s records of public hearings held in the town of Mineralnye Vody in 2006; EHS procedures of a construction contractors; and company’s emergency preparedness and response procedures.

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 System;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety and Security.
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management

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

PS5: Land Acquisition and Involuntary Resettlement as the project development involved an acquisition of about 9 hectares of municipal industrial land through a long term lease agreement. The greenfield land plot has not been in use before acquisition.

PS7: Indigenous People as there are no indigenous people relying on traditional livelihoods around the project site.

PS8: Cultural Heritage as there are no heritage resources known by local heritage authorities and it is highly unlikely that previously unknown heritage resources, particularly archaeological resources, will be identified during project construction and operation.

Environmental and Social Mitigation Measures

The findings of the IFC’s review and conclusions are summarized for each applicable PS in the paragraphs below. Supplemental Actions to address identified PS issues were agreed in the attached Environmental and Social Action Plan (ESAP) as the condition of IFC’s investment. When implemented, these Actions should ensure the Project’s compliance with the environmental and social requirements: the host country’s laws and regulations and IFC’s Policy and Performance Standards on Social and Environmental Sustainability (PS or Performance Standards).

PS:1 Social and Environmental Assessment and Management System

Social and Environmental (S&E) Assessment:

Environmental Impact Assessment (EIA) study including development of measures to avoid, mitigate, or compensate for adverse social and environmental impacts has been undertaken during the Project design phase. E&S risks and impacts were analyzed for the project construction and operational phase and recognized as limited and generally site-specific.
The State Regional Environmental and the State Expert Review Committees reviewed the EIA and design materials and issued Positive Conclusions on compliance with Russian laws and regulations followed by a permit for starting the construction.

IFC’s review of the Project Assessment Information has identified that it generally meets the requirements of PS1 but additional assessment is needed in order to determine the applicability of, or compliance with PS 6 in regards to the impacts on fish resources of the river Jemukha due to the river being covered while passing the site. This additional assessment was included into the company’s Action Plan.

In 2006, as part of the project’s assessment process, the company carried out a community meeting in the town of Mineralniye Vody. To meet IFC’s requirements on local disclosure, the company will additionally disclose hard copies of the summary of S&E information to local communities at an information desk at the entrance to Kulon Yugros’ site, supplemented by internet-based disclosure on the sponsor’s web-site http://espro.ru/.

Environmental and Social Management Systems (ESMS):

Although ESMS on corporate level is not ISO 14001 or OHSAS 18001 certified, operational procedures and organizational structures provide adequate control of E&S matters. It is supported by a technical standard consolidating the construction experience of the sponsor, and setting requirements for quality and safety of projects developed by the sponsor.

Environmental, health and safety (EHS) issues at the construction phase of the project are managed through delegation of EHS responsibilities to general contractors. The sponsor implements the procedure consistent with the advanced international practices for selection of contractors and for materials’/equipment procurement. It ensures outsourcing of construction operations to reputable contracting companies and purchasing of energy-efficient and environmental friendly equipment. However, this procedure does not include consideration of a bidder’s EHS performance.

General contractors are responsible for the Project’s S&E assessment; obtaining necessary approvals and permits; construction waste management, etc. The general contractor has the site based staff in charge of regular inspections and monitoring of EHS performance, including implementation of mitigation measures designed to manage EHS issues associated with the construction. The site based outsourced technical expert is in charge for inspections to confirm that designed specifications are implemented. The similar approach was introduced for Kulon Yugros project. The selected construction contractor has a well-developed management system and organizational structure that ensure proper addressing of EHS risks during the construction.

Going forward, the sponsor will introduce a corporate approach towards EHS management to provide support to individual subsidiaries on technical, managerial, financial and knowledge-exchange aspects of environmental protection and ensure consistency across subsidiaries, hereby reaching wider than the actual project.

As the first step, the sponsor has appointed a corporate environmental, health and safety manager to establish environmental policy, corporate standards and operational procedures for the Espro Group of companies as a whole – consistent with IFC environmental and social Performance Standards (PSs). Operational procedures will ensure environmental and social screening of business opportunities and future projects, introduction of additional selection criteria to evaluate ESHS performance of bidders; development of certain ESHS requirements for contractors and tenants; comprehensive ESHS performance monitoring of all its operations; and allocation of necessary resources for continued compliance with Russian regulatory requirements and IFC PSs.

The corporate manager will monitor EHS aspects of Kulon Yugros project on construction and operation phases and provide support to the site base staff in charge of social and environmental matters of the project. Corporate EHS requirements for tenants will be applied to the project upon its start-up.

- PS2: Labor and Working Conditions

The Project will create new jobs at the warehouse itself, and will increase the level of local business activity in other related sectors such as retail, construction, and transportation. The Project will create about 150-200 new jobs locally.

National labour laws provide extensive protection for workers and ensure that a large set of social benefits must be provided. They specify rights and responsibilities of an employer and employees, guarantee 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 sponsor strictly adheres to the national labour laws and has a corporate human resources policy (the “policy”) in place. The policy is supported by internal agreements that specify the employee/employer relationships including mutual obligations, working time, benefits and holidays, remuneration, etc.

Corporate policy provides the possibility for employees to raise workplace concerns to any representative of the management team. However, the existing ‘open door’ policy from managers should be enhanced to meet PS2 requirements. The sponsor recognizes the importance of understandable and transparent grievance procedure across the group. The existing practice will be improved to: inform the workers of the mechanism at the time of hire; make it easily accessible to them; involve a formal response to the worker within a defined timetable; have a route whereby anonymous complaints can be made; track the frequency and nature of workplace grievances; and to have an appeal mechanism.

Kulon Yugros will follow the sponsor’s labor standards.

The sponsor requires its construction contractors companies to implement national labor laws and regulations in its projects.

The main occupational health and safety (OHS) issues of the Project are associated with the construction phase. These risks are controlled by the construction company through implementation of internal safety procedures; regular OHS training of the company’s and subcontractor’s personnel together with provision of appropriate tools and equipment. This is supported by regular inspections undertaken by the sponsor’s staff as described above.

The construction work force will not exceed 50 people, mainly locals. A temporary construction camp conforms to general health and safety parameters.

- Emergency preparedness and response: To minimize potential risk of major fire for personnel, the warehouses will be equipped with smoke detection and fire suppression sprinkler systems; fire-resistant ceilings; a fire break /wall separating the warehouse in two cells; two detached fire water tanks and a fire pump station. Emergency preparedness and response plans will be established and communicated to future tenants in accordance with the national regulations.

-PS3: Pollution Prevention and Abatement:

- Pollution prevention, resource conservation and energy efficiency:

Espro is the first Russian developer which entered the U.S. Green Building Council (USGBC) and is applying USGBC environmental friendly initiatives for the construction of industrial property in Russian market. Moreover, the sponsor is considering implementation of BREEAM (The Building Research Establishment Environmental Assessment Method), a widely used environmental assessment method for buildings. It sets the standard for best practice in sustainable design and ensures that best environmental practice is incorporated into a building.

The sponsor will implement energy efficient technologies for heating, lighting, CFC-free air conditioning, and water treatment: some of them include use of sandwich panels for the warehouse for reduction of the heating need of the building; gas-fired boilers will be equipped with auto flame control system that maintains standard balance of pollutants in exhaust gases and energy efficiency.

- Power, water supply and wastewater management: The power and natural gas will be sourced from the public network. Water for domestic needs will be supplied to warehouse facilities from the municipal mains; wastewaters will be discharged to the municipal waste water sewerage system for treatment. Storm waters will be treated to remove suspended solid particles and oil products at an onsite wastewater treatment plant (WWTP); treated waters will be collected in the concrete tanks and used for technical needs (area watering, etc.)

- Air emissions: Air emissions at the operational phase will be local and limited to those arising from the transport fleet and a gas-fired boiler.

- Wastes and hazardous materials: Wastes generated at the construction and operation phases of the project are identified in the EIA. Solid wastes will be removed to the municipal landfill site. The warehouse might accept limited hazardous materials/goods (mainly household chemical goods). These goods will be stored at the specially designated sections of the warehouse. The Sponsor will ensure that staff will be trained properly to handle specific goods and use fire protection equipment.

- Ambient consideration:

The main environmental impact of the project is associated with the location of the warehouse facility in the water protection zone of the river of Jemukha. To avoid potential pollution of river water, a closed concrete culvert/ tunnel of about 360 m length is installed along the site border, which enclose the river over this stretch.

The project area has high seismicity therefore special design specifications are developed to address the issue.

The land plot has shallow underground waters (aquifer depth is 1.32-2.24 m); baseline surveys identified that the land plot is periodically flooded with underground waters. The sponsor has provided an in-house expert conclusion which confirms that the site specific geological conditions are addressed properly through adopted technical/design solutions and they will be applied during the construction phase. The State Expert Review Committee reviewed design materials and issued a positive conclusion for the construction of the warehouse at this land plot.

- PS 4: Community Health, Safety & Security

The nearest village Borodynovka is located 1 km from the project site.
Construction and routine operation of the warehouse facility should not have negative impacts on community health, safety and security.

Some potential EHS issues associated with the increased traffic on the existing narrow access roads might arise as some road sectors are located rather close to individual houses. These will be addressed through a new road junction planned to be constructed according to the municipal Masterplan. It is expected to facilitate access to the industrial area, passing neighboring villages by; and prevent any potential traffic congestion on the federal highway “Kavkaz”, and, thus, to reduce air emissions from traffic. After its construction, none of the neighboring settlements are likely to be affected by the increased traffic. The sponsor is committed to apply any feasible efforts to support this construction, including financial support up to 500,000 Rub.

PS 6: Biodiversity Conservation and Sustainable Natural Resource Management

The warehouse facility is located in the region officially recognized by the Russian laws as a special protected resort area, Kavkazskie Mineralnye Vody, created for the conservation of natural therapeutic muds and mineral waters. Within this area the project site is located where commercial activities are permitted if they do not have negative impacts on natural resources during the project life cycle.

EIA studies identified that the project environmental and social impacts at the construction and operation phases are few in number, limited by the facility site upon implementation of the specific protection measures to avoid impacts on natural underground mineral waters, including concrete pavement of the project site; and collection, treatment and storage of the storm water to prevent its discharge to terrain or watercourse. Sanitary water will be discharged to the public system. Design specifications also include enhanced waterproofing and sealing of water supply, drainage and discharge systems.

The State Regional Environmental and the State Expert Review Committees reviewed the EIA and design materials and issued Positive Conclusions on compliance with Russian laws and regulations followed by a permit for starting the construction.

Stakeholder Engagement

The sponsor’s commitment to environmental and social sustainability is provided through disclosure of its E&S practices on the website http://espro.ru/achievements. The company issued and distributed booklets describing the nature and scale of projects and proposed project activities. The sponsor will include ‘the project E&S aspects’ page in the booklets for further projects.

Public consultations of the Kulon-Yugros project were held in the nearest town of Mineralnye Vody at the phase of the land plot allocation. To enhance disclosure practices focused on E&S aspects of Kulon Yugros project the sponsor will arrange local disclosure of the project E&S information to the nearest communities; publish an E&S summary of the Kulon Yugros project on the sponsor web-site http://espro.ru/, and make hard copies available at Moscow office and Kulon Yugros site. Local disclosure will be supported by an advertisement in local newspaper with the addresses of where hard copies of document can be obtained and to whom questions may be directed.

For inquiries about the project, please contact:

Russia, Moscow, 119034, 23, Gagarinskiy pereulok, office 23
Tel: +7 (495) 797-93-53
Fax: +7 (495) 637 -50-36
Project manager: Zaychenko Andrey Evgenevic

Client Documentation

File Name	Actions
Final 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.
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).

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