27963 - ModernKarton WCI

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Environmental & Social Review Summary

Project Number

27963

Company Name

MODERN KARTON SANAYI VE TICARET ANONIM SIRKETI

Date ESRS Disclosed

May 18, 2009

Country

Turkiye

Region

Central Asia and Turkiye

Last Updated Date

Jun 3, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 23, 2009
Signed : Jun 26, 2009
Invested : Mar 1, 2010

Sector

Paper Packaging Products (Including Boxes, Cartons, etc.)

Industry

Agribusiness and Forestry

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

Modern Karton Sanayi ve Ticaret A.S. (Modern Karton or the Company), the main operating company of Eren Group’s (the Sponsor) paper and packaging business, was established in 1974. It manufactures testliner and fluting paper using waste paper at its factory located in Corlu, 100 km west of Istanbul. With a 700,000 tonnes per annum capacity, Modern Karton is Turkey’s largest plant in the corrugated board sector. Modern Karton has approached IFC for up to US$40 million in debt to assist in financing working capital related to the recent expansion project and additional financing needs of the Company as well as its packaging subsidiary Modern Ambalaj which is the co-borrower.

The recent expansion project consists of capital expenditures of $400 million for:

- a capacity increase of 400,000 metric tons per annum to the paper mill through installation of a new paper making machine at Modern Karton;
-an investment in the packaging and paper recycling business of Modern Ambalaj;
-an expansion of the associated cogeneration plant (Modern Enerji) and the wastewater treatment plant at Modern Karton.

Overview of IFC's Scope of Review

IFC’s review of activities for this proposed investment consisted of appraising environmental, health, safety and social information submitted by the Sponsor as well as site visits to the facilities related to the paper processing and packaging material operations. In this context, the following Eren Group companies and facilities were visited: the paper factory of Modern Karton, the corrugated carton and packaging material manufacturing site of Modern Ambalaj, the cogeneration plant of Modern Enerji (supplying energy to Modern Karton and Modern Ambalaj) located at Corlu, as well as the waste paper collection and preparation station of Eren Kagit in Gunesli, Istanbul.

Interviews were conducted with the Human Resources (HR) Director of Paper and Packaging Operations of Eren Group, the Site Managers, HR and Administration Managers, Quality, Environmental, Health and Safety Managers and Engineers of Modern Karton, Ambalaj and Enerji.

Key documents reviewed include air emission reports, wastewater analysis, relevant permits, noise and dust measurements, lighting measurements, accident reports and statistics, Emergency Response Plans, minutes of Health and Safety Committee Meetings, examples of risk assessment studies, human resources policy and relevant procedures, examples of the contracts for blue and white collar employees, employee satisfaction surveys, and documentation of trainings and drills.

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 (PSs):

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

Since the proposed investment is to provide working capital for the existing plants located in industrial zones, there is no issue related to the PS 5 to 8.

The key environmental, social and occupational health & safety and issues associated with this investment include:

- environmental and social management systems and performance tracking at the existing manufacturing operations and technical facilities;
- occupational health and safety;
- human resources policy and procedures particularly in terms of freedom of association, grievance mechanisms and management of retrenchment;
- control of supply chain operations;
- hazardous materials management;
- management of air emissions, process effluents and wastes;
- hazardous materials management;
- water and energy conservation.

Potential adverse impacts arising from these issues are all relatively limited, are site-specific and can be easily mitigated, as will be described in the next section of this summary. As such, this is an Environmental and Social Category B project.

Environmental and Social Mitigation Measures

The Sponsor has presented plans or readily available measures to address these impacts to ensure that the proposed investment will comply with the local legislation and IFC’s requirements on environmental and social sustainability.

PS1- Social & Environmental Assessment and Management Systems:

An Environmental Management System (EMS) consistent with ISO 14001 standard and an Occupational Health and Safety Management System (OHSMS) consistent with OHSAS 18001 are under development at Modern Karton. The Modern Ambalaj packaging material facility located at Corlu, has already been certified to OHSAS 18001 and targets to achieve ISO 14001 by the end of 2010. Both certifications will be extended to all paper and packaging manufacturing operations of Eren Group. All paper and packaging facilities are already certified compliant with the ISO 9001 Quality Management System Standard.

At Modern Karton, the management responsibilities for environmental and social issues are undertaken by different departments. There are two environmental engineers reporting to the Treatment Plants’ Manager. In addition to a health and safety engineer who reports to the Production Manager, one of the environmental engineers supports the health and safety management operations. Fire safety and drills are under the responsibility of Administration and Security Manager while occupational health services are supervised by the HR Department. At Modern Ambalaj Corlu, there is a full time HSE Engineer working within the Quality Operations Department, who coordinates the implementation of the management systems.

The Sponsor will revise its organization to create an integrated HSE management/coordination function to ensure consistent HSE approach and supervision throughout its operations.

PS 2- Labor and Working Conditions:

Human Resources (HR) Policy and Management:

Eren Group’s Human Resources Policy states that motivation and satisfaction of its workforce are of utmost importance. Modern Karton, Ambalaj and Enerji have established Human Resources procedures that cover several key aspects on working conditions and terms of employment. Even though there is no formalized union activity, the management states that each employee is free to join a worker organization. Worker representatives are part of the Health and Safety Committee. It is also reported that there is an open door policy; surveys of work climate are conducted among all staff, grievances and suggestions by the employees are taken into account to develop HR action plans.

The HR Policy will be revised to ensure that it explicitly includes statements about non-discrimination of the employees, provision of equal opportunity and respect for freedom of organization. The revised and documented HR policy will be effectively communicated to the employees as defined in the attached action plan.

At Modern Karton and Modern Ambalaj, 70% of the total workforce is composed of contractor employees. The HR Management of the paper group will review the status according to the requirements of the latest local regulations on the use of sub-contractor companies and will take action to re-organize the workforce as necessary to ensure compliance with the regulations as well as with IFC’s Performance Standards. The organization will be established in a manner that will facilitate the implementation of the revised HR policy.

Within Eren Group companies, the minimum age of employment is 18. The Sponsor has agreed to develop a mechanism to assess and mitigate possible risks of child labor in its supply chain, particularly related to the waste paper collection.

On completion of the capacity expansion and automation, Modern Karton closed the two old paper production lines PM1 and PM2 resulting in the loss of 150 jobs in 2008. Modern Karton has reported that all retrenched employees were compensated in accordance with the local regulations. Retrenchment has recently occurred also in the packaging facilities of the Group, mainly as a result of the reduced production output associated with the global economic environment. Even though it is not projected, the possibility of further retrenchment cannot be excluded given prevailing economic uncertainty. If additional retrenchment becomes unavoidable, Modern Karton will follow, in addition to the local regulatory requirements, IFC’s Performance Standards, to develop and implement a retrenchment plan, based on non-discrimination and consultation with the employees to minimize adverse impacts. Opportunities will be created wherever possible for transfer or re-hire of the employees in other operations of the Eren Group.

The policy, procedures and practices will be reviewed and enhanced as necessary as described in the attached Action Plan, in order to ensure full compliance with local regulations and IFC’s Performance Standards (PS2) on labor management. The HR management system will also become compliant with the International Social Accountability Standard SA8000.

Occupational Health and Safety (OHS):

The paper and packaging group companies and relevant facilities have an established program to provide induction and periodic training for all employees, including contractors, on occupational health and safety aspects of its operations, environmental management, and labor issues. Environmental, health and safety training includes but is not limited to basic safety rules, hazardous working such as in confined spaces or at height, using right PPE for the job, fire safety, rules of the environment management system, basic and advanced first aid, training on working safely with chemicals and with lifting equipment. It has been reported that operation of power plants and other critical tasks are undertaken by certified operators.

Training and certification programs as well as established procedures and programs will be reviewed at all paper and packaging group plants and ensured that they are adequately instituted at each facility and inspection mechanisms are in place for full implementation of health and safety rules.

The Health, Safety and Environment (HSE) departments or functions at the sites which were visited by IFC are supported by plant fire brigade with specifically trained staff and by HSE agents, who are plant workers with advanced safety and first aid training. HR management will review these programs and ensure that medical staff, technical resources and first aid teams are consistently and adequately allocated at all sites.

As required by the OHSAS 18001 standard, occupational health and safety risk assessments are regularly conducted in Modern Ambalaj Corlu facility and have been launched at all locations. A workplace monitoring program has been developed and regularly implemented at all sites. It includes testing of water (chemical and microbiological testing) with respect to potable water limits for human consumptions and workplace dust and noise. The most recent set of dust measurements conducted in 2006 at Corlu plant were below the relevant national limits. Noise monitoring show levels varying from 65-108 dB(A). Hearing protection is used for required working areas. Medical examination of staff is conducted annually, including audiometric tests. The workplace monitoring plan will be reviewed to include the new machinery and all kind of chemical exposures at the workplaces. Emergency and area signage (including ways of pedestrian passage) are present at Modern Ambalaj facilities and these good practices will be extended to the other paper group operations and relevant facilities.
A certain number of risks identified during the site visits are indicated in the attached action plan and the workplace risk assessment will be reviewed and accordingly to ensure safe operations. The machine guarding and safety equipment being adequate on new machinery, it will be improved for PM3 of Modern Karton and Modern Ambalaj facilities especially for the old lines. Use of adequate personal protective equipment (PPE) both for own and contractor work will be enforced.

Lost time accident rates and total recordable accident rates are recorded. Accidents are investigated and corrective and preventive actions documented and tracked. An increase has been recorded in accident rates in recent years and Sponsor has taken action to improve the performance via establishment of OHSAS 18001 occupational Health and Safety Management System at all its sites in relation with the paper and packaging materials’ manufacturing.
Essential emergency plans to respond to major accidents are in place. Fire drills are conducted regularly at all sites. Fire detection and alarm systems are installed at Modern Karton plant. Fire fighting equipment includes mainly mobile fire extinguishers and hydrant systems. The PM4 area of Modern Karton is equipped with sprinkler systems. Automated CO2 extinguishers are in place at the cogeneration plant of Modern Enerji. There are action plans to improve further fire safety installations including particularly, installation of fire detectors and alarm systems at Modern Ambalaj facilities. Evacuation routes also will be part of a further review at all plants to ensure adequacy in number and locations.

PS3- Pollution Prevention and Abatement:

Pollution Prevention

Liquid Effluents: Modern Karton has three wastewater treatment plants. Discharge effluents from all plants conjoin at a station on the border of the plant and collectively discharged to one of the arms of Ergene River. Together with the installation of PM4 production line, primary and secondary wastewater treatment plants (WWTP) of latest technology were constructed and have been operated. The WWTP includes primary sedimentation, aerobic and anaerobic treatment, softening, flocculation, final sedimentation units and belt filter for sludge dewatering. With the operation of the new system a treated effluent COD 250 mg/L has been achieved, the inlet COD being approximately 5000 mg/L. Water consumption and discharge amounts together with the mass loading of pollutants as kg/Adt will be further studied and reported to IFC as defined in the action plan.

The wastewater treatment plants’ performance is within the discharge permit limits established by the Turkish authorities. Documented wastewater treatment and monitoring procedures will be established and analysis will be extended to include all parameters in IFC guidelines in addition to the parameters of the local pollution control regulations as defined in the attached action plan. Since Eren Group is committed to implement best practices for pollution control, feasibility will be studied to further increase effluent quality through use of technologies including tertiary treatment.

The WWTP with a capacity of 500 m3/hr is composed of both aerobic and anaerobic treatment units. After anaerobic treatment 500-600 m3/hr biogas is generated and burnt to produce steam used in the facilities. Modern Karton has reported that gas recovery and steam production meets all the operational costs of the treatment facilities.

The Company reported that the sludge is collected in a sludge tank and disposed of at an off-site licensed facility, according to its classification as non-hazardous industrial waste. Nevertheless, sludge analyses will be conducted by an accredited laboratory in order to ensure appropriate disposal. Wastewater from the existing paper making machines is discharged to a wastewater treatment plant with a large quantity of the treated wastewater recycled back to the paper making process and the remainder discharged to a small stream as previously indicated. A similar system used for the new paper making machine, with about 66 percent of the treated wastewater recycled back to the process and the remainder is discharged. The Company will study further opportunities to increase water conservation.

Air Emissions: As required by IFC for the expansion project, low-NOx burners were installed at Modern Enerji facilities. Eren Group is in the process of air emissions permit renewal and delivery required following the expansion of Modern Karton and Modern Enerji. IFC will be provided with the relevant emission monitoring reports as well as the permits once delivered. The emissions monitoring program will be reviewed according to the IFC guidelines and relevant data will be included in the Annual Monitoring Reports which will be submitted to IFC.

Hazardous Materials and Waste Management: The Company has an on-going program to minimize hazardous chemicals. No peroxide or chlorine bleaching is used in the operations. Tests are planned for replacement of current bleaching chemicals (eg. Chromaclear and sodium-metabisulfite) by enzymatic agents which are biodegradable. The Company will also look for alternatives of other hazardous chemicals such as trichloroethane. CFC and HCFC containing refrigerants (R-12, R-22) and fire extinguishers are still in use at certain areas in the facilities and they will be replaced with non-ozone depleting alternatives.

The chemical storage areas will be reviewed to ensure that containment basins are provided with the principle of 110% of tank volume at Modern Karton and Modern Ambalaj. Adsorbent materials for chemicals and oil will be available at all chemical handling and storage places.

Solid wastes and other hazardous wastes (i.e. paper, glass, and organic waste) are either recycled or transferred to the government licensed municipal landfill for disposal.

Resource Efficiency, Energy Use and Control of Greenhouse Gas Emissions: Modern Karton has in place water conservation program through recirculated use of process waters as previously indicated. Good practices for energy conservation are also implemented, such as use of biogas generated from wastewater treatment operations as an energy source for the operation of facilities and heating of the offices. At Modern Enerji as well, waste heat recovery techniques are in place to a certain extent. Modern Karton, Modern Ambalaj and Modern Enerji will regularly report to IFC the status of water and energy conservation programs including identification of further opportunities to increase saving.

PS4: Community Health, Safety and Security

Modern Karton, Ambalaj and Enerji facilities are established at designated industrial zones. Therefore, potential impacts to the local communities are limited in number and can be mitigated as described n the previous sections. In the industrial zones where the facilites are located, the Company has the capability to collaborate with the neighbouring facilites in emergency conditions. The Company reported that all security teams are trained to address emergency conditions and the management of the teams is in line with IFC’s Performance Standards.

Stakeholder Engagement

As part of its environmental, health and safety management systems, Modern Karton and Modern Ambalaj have established communication procedures to openly share information with the third parties and to address community concerns about possible adverse impacts of their operations and control measures in place.

Given the type and extent of this Project loans which will provide working capital for paper group operations, there is no regulatory requirement of public consultation. The information about the Project will be shared with the community through publishing this Environmental and Social Review Summary and the relevant action plan.

Since Modern Karton, Ambalaj and Enerji facilities are located in designated industrial zones, interaction with the local communities around has been limited. The Sponsor Eren Holding has been providing support to the activities particularly related to the improvement of education level in the less developed regions of the country, will also look for opportunities to further engage with the communities in the vicinity of its operations

Client Documentation

File Name	Actions
Modern Karton 27963 ESAP FI.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.

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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.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

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