28501 - Kronospan CEE-BG

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Environmental & Social Review Summary

Project Number

28501

Company Name

KRONOSPAN BULGARIA EOOD

Date ESRS Disclosed

Feb 23, 2010

Country

Bulgaria

Region

Europe

Last Updated Date

Feb 26, 2017

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Jun 21, 2010
Signed : Jun 25, 2010
Invested : Sep 10, 2010

Sector

Wood Panels and Engineered Wood Products

Industry

Agribusiness and Forestry

Department

Regional Industry MAS LAC & EUR

Project Description

The proposed project is to provide long term financing for the Kronospan Bulgaria''s current operations located near Bourgas and Veliko Tarnovo in Bulgaria. The plant in Bourgas has been upgraded and operated by Kronospan since 1997, while the Veliko Tarnovo plant was acquired in 2006. The annual capacity of the two plants are approximately 141,000 m3 oriented strand board (OSB), and 211,000 m3 of particleboard (approximately 50% with added melamine facing) in Bourgas and 90,000 m3/year of particleboard in Veliko Tarnovo.

This production is based on a mixture of round wood and wood waste, such as saw mill strips/waste cuttings/chips and sawdust. The non-wood raw materials, such as resin/glue and lamination foils are all imported.

Overview of IFC's Scope of Review

IFC’s environmental and social review of this project included: a site visit to the main Bulgarian facility near Bourgas on the Black Sea coast; review of information provided by Kronospan Bulgaria (“Kronospan” or the “Company”) in response to social and environmental questions; review of the past performance documentation for the Kronospan Bulgaria project (Kronospan Bulgaria has been an IFC client since 1999); and follow up discussions. Kronospan, as an international corporation is well known to IFC and IFC specialists have, on separate occasions during the last year, visited Kronospan-owned and operated facilities in Russia, Bulgaria and Serbia and have established an understanding of the corporate management structure and Kronospan’s corporate systems for social and environmental standards and measures used in the management of environmental and social impacts.

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
- PS6: Biodiversity Conservation and Sustainable Natural Resource Management

The production facilities are all existing and there is no planned Land Acquisition (PS5), no Indigenous Peoples (PS7) are known to be in the project area, and there is no Cultural Heritage (PS8) on or near the project site.

The proposed project was developed in accordance with national regulatory requirements and international standards by a Sponsor committed to good environmental and social management. The project has sustainable raw material supply, will follow international labor standards, and avoids significant pollution. All project facilities are to be developed on existing sites, without further land acquisition. With no indication of impacts related to Performance Standards 5, 7 and 8 and only readily mitigated environmental issues under Performance Standards 1 through 4, and 6 this is a Category B project.

Environmental and Social Mitigation Measures

The Sponsor has presented plans to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with host country environmental and social requirements, as well as IFC’s Environmental and Social Performance Standards and industry guidelines. The information about how these potential impacts are being/will be addressed by the project is summarized in the paragraphs that follow.

PS1: Social and Environmental Assessment and Management Systems:

Social and Environmental Assessment:
Kronospan Bulgaria acquired the original Bourgas assets in a privatization process in 1997 and acquired the Veliko Tarnovo assets in 2006, and has since invested to upgrade the two production plants to international operating standards. The upgrades were subject to assessment by the relevant authorities, which found the upgrades to be in compliance with the local legal requirements. IFC''s E&S due diligence at the time of the Bourgas plant upgrade was described in a publicly disclosed Environmental Review Summaries, which can be found using these links:
1999 review: SPI # 9726
2000/2001 review: ESRS #10542

IFC has since then been following the project through supervision visits.

- Social and Environmental Management System:
Kronospan has developed a corporate management system and organizational structure appropriate for maintaining and continuously improving the environmental performance of all its international operations in line with its business principles. Kronospan Bulgaria has developed its own management systems following these corporate norms. It has not yet certified these internal systems according to the common ISO/OHSAS standards but has established them to be conformant with these standards and certifiable if needed. Kronospan’s local operations are responsible for complying with these systems, and the implementation is secured by the use of an international deployed management group in close contact with all operations. “Auditors” for all relevant areas, such as environmental and occupational health and safety performance visit the individual facilities on a regular basis. The title of Kronospan’s defacto corporate environmental manager in charge of overseeing the Bulgarian operations'' adherence to the corporate standards is therefore “Interner Umwelt Wirtschaftsprufer” equivalent to “Internal Auditor on Environmental Affairs”. This person met with IFC’s environmental specialist in preparation for the review. The local responsibilities at the operations level is well defined within the local management organization and is frequently checked by the corporate internal auditor(s). E&S responsibilities are shared by four specialists: Power Engineer (energy use), Labor Safety Engineer (OHS, training), Fire Safety Specialist (protection, suppression, training) and an Ecologist (waste management, documentation system, reporting). IFC has, within the last year visited some of Kronospan Bulgaria''s outsourced harvesting operations and found them to adhere to a verifiable Chain of Custody (CoC) documentation.

PS2: Labor and Working Conditions:

The Kronospan facilities in Bulgaria had at the end of 2009 approximately 300 direct employees (220 in Bourgas and 80 in Veliko Tarnovo). The forest harvesting & replanting and wood & final product transport supporting these operations has, been estimated to support a further up to 10,000 jobs within the management of the forests supplying wood to Kronospan, and the harvesting and transport companies involved in the supply and distribution chain.

- Human Resources Policy, working conditions:
Kronospan has a Human Resources policy which is designed to ensure compliance with corporate and national labor regulation and is consistent with PS2. The policy defines rights and responsibilities of the employee and employer, including terms of employment and working conditions, grievance mechanisms, and promotion of non-discrimination and equal opportunity. There are two labor unions (KNSB and Podkrepa) represented among the employees at the facilities, and Kronospan has not had conflicts with either of these unions.

- Occupational health and safety:
Kronospan has a tradition for designing its operations and OH&S organizations to achieve good transfer of safety culture and knowledge between their international operations. These principles, including appropriate signage and use of PPE, familiarity with OHS and fire suppression precautions, and proactive training in OH&S, are strictly enforced at the production facilities operated by Kronospan Bulgaria and have resulted in an accident frequency of 5.3 LDA/MMH (Lost-Day-Accident / Million-Man-Hours) in 2008 which is relatively low. Due to the outsourcing of the harvesting and transportation activities Kronospan Bulgaria has not been able to implement the same standards in the supply chain and this now needs extra attention. The ESAP agreed with Kronospan therefore includes initiatives to improve the supply chain monitoring and selection to promote sound OH&S principles among suppliers.

Work place monitoring for particulate matter, VOC and formaldehyde are further important OH&S parameters in this industry sector. The specifics around the control of these risks are described in the PS3 section on pollution control.

- Emergency Preparedness and Response:
To minimize the potential risk of fire or explosions at the production facilities operated by Kronospan Bulgaria, all operations are equipped with a series of prevention and fire fighting measures. This includes automatic systems (equipment specific systems plus full sprinkler coverage in buildings), fire water stands and hoses around the full area, hand held extinguishers, smoke / spark / temperature detection as appropriate, fire alarm, fire water tanks and a fire pump station with both electrical and diesel driven pumps. Kronospan has also developed operational procedures for fire safety monitoring to control and ensure adherence to fire safety requirements and for emergency response. Fire drills are jointly organized with the Bourgas Fire Department and conducted at least twice a year.

Kronospan has obtained appropriate approvals and permits from relevant supervisory authorities and technical gas services.

PS3: Pollution Prevention and Abatement:

The pollution prevention measures at Kronospan Bulgaria follows the principle adhered to at all Kronospan facilities. These principles are established at the corporate level and are then implemented in all Kronospan facilities, either from the very start of production when new facilities are constructed or later through action plan upgrades when existing facilities are acquired. Both Kronospan''s plants in Bulgaria have followed the second path.

Emissions to air.
These facilities have varied sources of emissions to air as follows:
Filtered air arising from wood dust control equipment used with sanding and cutting processes and chip and flake preparation;
Combustion products arising from the board and lamination press heating systems;
Combustion products, water vapor and organic compounds released from the chip and flake dryers; and
Exhaust of fumes arising from the board presses.

The direct dryers at the particle board and OSB lines are equipped with standard end of pipe cleaning technology based on wet electrostatic filtration (type SENA filter by Scheuch GmbH.).

The boiler uses wood waste and natural gas as fuel. Sulfur oxide emissions are not expected with this fuel mix, and monitoring data shows NOx emissions below local and IFC guideline values.

The chip and flake dryers at Bourgas are heated by pulverized wood burners, with natural gas support fuel. Each dryer employs partial recirculation of exhaust gases, for heat recovery and to facilitate combustion of compounds driven from wood, with final exhaust gases being passed through a wet electrostatic precipitator (WESP). This represents an upgrade from the previous coal and oil fired heater. Emissions of particulate from the WESP are around 15 mg/Nm3 meeting IFC and local requirements. VOC emission data for the Bourgas operation has also shown compliance with IFC guidelines.

The three direct wood chip dryers in Veliko Tarnovo are heated by a combined pulverized wood and natural gas burners. Exhaust gas from all running dryers is treated by dry electrostatic precipitation unit type EFB filter with efficient reduction of particulate matter and organic compounds on an electrically charged ceramic bed. The concentrations of particulate at the common exhaust from the dryer is about 8 mg/Nm3. VOC emission data for the Veliko Tarnovo operations has also shown compliance with IFC guidelines.

Formaldehyde remains is an important parameter to control in the production of wood / resin based products such as the boards produced at Kronospan, both that remaining in the product and in the ambient emissions. To ensure the appropriate occupational air quality with respect to formaldehyde, the OSB press in Bourgas has a vacuum system which collects the released gases and removes them from the working environment, and for the chip dryers a recirculation ensures the released formaldehyde in both cases stays within the guideline limits. The permanent workplace is situated in independently ventilated control rooms with a fully automated press control system.

The Veliko Tarnovo opening press is equipped with an exhaust system to ensure appropriately low concentrations of formaldehyde and particulate matter at the press. The permanent work place is situated in the separate independently ventilated control room. Concentrations meet IFC guidelines.

Solid waste from production consists mainly of ash from biomass burning and melamine including cutting waste from the lamination process. Both these waste types are scheduled to be deposited at a local landfill. Maintenance chemicals/oil are handled with the help of approved special waste handlers.

Waste water is being discharged to the local municipal water treatment system. The discharge quality has been verified as complying with the system requirements.

The production at Kronospan is based on round wood received from forest operations and waste wood collected from saw mills etc. The waste wood would, if not used at Kronospan, otherwise be incinerated or disposed of in landfills emitting methane. By incorporating these waste and low value materials into a useable product the net impact is sequestration of carbon that would otherwise be lost.

The estimated CO2 emissions caused by production at KRONOSPAN Bulgaria is 85.668 t of CO2 per annum, which comprises:
47.490 tons emitted from the burning of carbon neutral biomass,
18.229 tons from natural gas used in heaters and dryers and
19.950 tons resulting from electricity produced and delivered by the Bulgarian national grid.

PS4: Community Health, Safety and Security:

All the Kronospan Bulgaria sites are located in industrial areas. The Bourgas plant is located in the North West Industrial zone of Bourgas, a major city on the Bulgarian Black Sea coast. This facility is surrounded by a major road on one side and other industries on the three other sides. The Veliko Tarnovo plant is located in an industrial zone of the inland town of the same name. This facility is surrounded on two sides by other industries and on the remaining sides by a road and open fields. Finally Kronospan has a new logistics center located near Sofia in an industrial area. This facility, which only operates for the reloading and distribution of Kronospan''s products, is surrounded by railway tracks and other industries.

Kronospan''s operations are all equipped with several systems to avoid fires and/or limit the effect if or when a fire breaks out. Furthermore, Kronospan is obliged to continuously develop and maintain an emergency response plan in cooperation with the local authorities to ensure the safety of its employees and limit effects on other stakeholders should a fire occur.

PS6: Biodiversity Conservation and Sustainable Natural Resource Management:

The forests used to source the fresh round wood for the Kronospan Bulgaria operations are almost completely state owned and operated forests plantations in which post-harvest treatment, including reforestation, is assured by the Regional Inspectorate for Forestry. The forest area for the sourcing is made available by way of 10 years purchasing agreements, and this has resulted in highly diversified locations of the lots harvested at any given time. Kronospan Bulgaria, like other buyers, does not control post-harvest regeneration. A significant part of the harvested areas are expected to go back to the native oak complex, thus leaving the soft wood areas diminishing year on year. This poses a potential threat to Kronospan in the long run, and Kronospan will therefore in accordance with the ESAP try to influence the authorities to encourage replanting of softwoods for industrial round wood, and obtain FSC certification.

In addition to the round wood supply Kronospan Bulgaria pursues the collection of wood waste from saw mills and other raw wood processors. When available this could supply up to 50% of the wood need for the operation, but has a tendency to be highly variable over time.

Stakeholder Engagement

Kronospan provides material and financial support to primary school building projects in the Bourgas region. The Bourgas facility also sponsors an Annual Open House to familiarize local residents with the plant’s operations and obtain feedback from interested parties. For both facilities Kronospan frequently discloses information to the local media detailing activities towards improving the environmental and safety performance of the production facilities.

Kronospan will ensure the current ESRS is disclosed locally as part of their continued interaction with the local community.

The environmental documentation is also publicly available in the following Kronospan Bulgaria EOOD offices:
1) Severozapadna Promishlena Zona, 8000 Bourgas, Bulgaria, and
2) District Cholakovtzi, Promishlena Zona, Str. Dalga Laka, 5000 Veliko Tarnovo, Bulgaria.

Client Documentation

File Name	Actions
Annual CO2 emission estimate Kronospan Bulgaria.pdf
20091203 Kronospan Bulgaria 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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