PS1: Social and Environmental Assessment and Management System
- Environmental and Social Assessment: Suu Dairy relocated to their existing facilities in 1985, prior to the enactment of the Mongolian law on Environmental Impact Assessment of 1998 (amended 2002). Ahead of planned upgrades to Suu’s production facilities in Ulaanbaatar, the Company will review existing and future environmental and social impacts relating to asset expansion and operation ensuring consistency with IFC’s Performance Standards. Development of Suu’s existing MCUs has formed a part of a modernization and expansion program introduced by the Mongolian Ministry of Food and Agriculture with the support of the Food and Agriculture Organisation (FAO) of the United Nations and the Government of Japan. Development of these MCUs has been consistent with the Mongolian regulatory framework while MCPs and MCUs footprints are small and are not expected to trigger the need for an Environmental Impact Assessment (EIA) under Mongolian regulatory requirements or IFC’s Performance Standards. Suu will undertake appropriate environmental and social screening assessment as part of the proposed MCU, MCP and milking parlor developments, ensuring consistency with Mongolian regulatory requirements and IFC’s Performance Standards.
- EHS Quality Management and Monitoring Systems: The Company’s laboratory received official Mongolian state quality accreditation in 2002 by the Department of Standardization and Measurement. Current raw milk testing procedures are twofold: i) at an individual herder level where in situ testing is undertaken analyzing milk acidity, density, temperature and fat content; and ii) following tanker arrival at Suu’s production facilities in Ulaanbaatar, further testing of the raw milk is undertaken which includes additional chemical and bacterial analysis. The milk not meeting the required standards is rejected at point of collection, with follow-up quality guidance being provided to the individual herder. Following primary cleaning, the milk is then chilled to 4-6°С before entering the production process. Presently, the current laboratory turnaround period for raw milk and final product analysis is approximately three days. As part of IFC’s investment, Suu will acquire BactoScan milk quality testing equipment, reducing testing turnaround times from 3 days to within 1 hour of production.
In combination with the upgrade to production quality testing facilities, Suu intends to supplement the existing Mongolian state quality accreditation with the implementation of an HACCP standard management system. Following implementation, Suu plans to apply for certification of this food safety, quality, EHS, occupational health and fire and life safety management system to ISO 22000 (incorporating HACCP). The integration of these management systems, which share a common approach, will provide a comprehensive framework for management of these elements and will meet IFC’s PS1 requirements. Presently, Suu does not have a formalized Environmental and Social Management System (ESMS) to manage E&S risks at existing and potential future assets. As part of IFC’s investment, Suu will develop and ESMS which will meet the requirement of IFC’s Performance Standards.
Suu’s products are tested monthly for melamine by the relevant Mongolian regulatory body. To date, Mongolian regulatory test results have shown conformity with national standards. Melamine testing equipment has been added to the investment plan and following the upgrade of laboratory equipment Suu will undertake melamine testing internally.
- Organization: Suu have recently hired a health manager and a safety and environment manager, whose roles include establishing a formalized HSE&Q management and training program of mitigation and performance improvement measures. The Company’s organizational structure defines the roles of the following departments tasked with Environmental and Social responsibilities, namely: Laboratory and Quality Control Management; Engineering and Maintenance; Production and Technology; Security; Vehicle Management; Human Resources and Milk Procurement.
- Supply Chain: On the milk supply side, Suu has established eleven MCPs and eight MCUs in counties (soums) within Tuv and Selenge provinces. During 2009/2010, MCUs and MCPs were supplied by 2,189 herders and a small number of farms in these areas. Milk suppliers are contracted on a yearly non-exclusivity basis and are not wholly dependent on Suu for their business viability. Therefore, the milk suppliers are considered not to be associated facilities of the Suu dairy production operation; rather, they are supply chain partners with a close working relationship to the Company. Herders visited during IFC’s appraisal were observed to have an established close relationship with Suu’s collection personnel.
To support expansion in raw material procurement, Suu has begun a program to further support existing suppliers and reach out to new herders and small-scale dairy farmers. The Company has identified an additional 22 locations to establish new MCPs. Suu also plan to develop 13 new MCUs to serve the majority of the new MCPs.
The Company is also establishing two milking parlors, in Selenge and Tuv provinces, which will offer a controlled environment for milking. Herders are encouraged to bring their animals to the existing parlor in Selenge province where milking is performed on site, while Suu employees ensure hygienic practices are adhered to. Whilst not yet at full operational capacity, the existing parlor in Selenge province has a capacity of 20 cows per milking with a maximum daily capacity of 500 cattle. Future development, land acquisition and consultation of the 22 additional MCPs, 13 MCUs and the two milking parlors will meet Mongolian regulatory requirements and be consistent with IFC’s Performance Standards, specifically in relation to animal welfare.
Milk is collected in the morning from 6.30 to 7.30 and 17.30 to 19.30 in the evening. Approximately 80% of Suu’s processed milk is collected through the MCU/MCP system. Whilst Suu’s trucks collect milk from the more remote single herder locations, the majority of product is brought in by herders and farmers to the nearest MCP or MCU location.
To improve Suu’s ability to reach current and new raw milk suppliers, the transportation fleet for milk procurement will be upgraded. Presently, the Company’s milk collection is undertaken by 22 trucks, although the majority of these vehicles lack adequate cooling systems and nearing the end of their life-span. Suu plans to purchase 15 new trucks with a cooling capacity ranging from 4-5 tons and one truck with 10 ton capacity. Each collection team (truck) consists of a driver and a lab technician who individually samples milk, as mentioned above.
Raw milk production varies during the year, becoming more abundant during summer months and falling back in the colder periods. Following a recent survey undertaken by Suu, the majority of herders own less than 10 cows, with typical yields being at around 5-6 liters/ day for Mongolian herds and up to 15 liters for Black Mottled, Semantal and Alatau breeds. Currently Suu’s milk collection levels are at 27,000t/ yr. In the summer, Suu typically produces 2,500 kg of powdered milk daily which is primarily stocked for winter dairy production due to the lower availability of raw materials during cold winter periods.
PS2: Labor and Working Conditions
Suu currently employs a total workforce of 213 persons, of which approximately 60% are female. Of the 13 management staff at Suu, 7 are female. The majority of Suu’s workforce is employed at its Ulaanbaatar production facilities. Oversight of all employment relationships is provided by the human resources function in the Company which is managed centrally from its offices located at the production facilities in Ulaanbaatar.
As required by Mongolian law, the human resources policy is included in employment contracts and addresses working conditions, terms of employment, and wages and benefits. Pension, loan and grant schemes are made available to Suu staff. This information is provided in the form of an employee handbook at the time of induction. Remuneration is competitively determined by referencing market rates, with contracted working hours being on an 8 hour day, 40 hour week basis. Suu have stated there are no plans for retrenchment in the near future, rather a continued workforce expansion in line with Suu’s 110%, 77% and 32% increases in staff during previous three years, respectively. Suu ensures that harmful child labor or forced labor is not employed directly or by subcontractors (typically used for maintenance and the proposed expansion programs) through verification of relevant documents. Although not explicitly stated, employment relationships recognize the principals of non-discrimination and equal opportunity. The employment of all Suu staff is consistent with Mongolian Labor Laws. Moving forward, the Company will review its human resources policy to ensure consistency with IFC Performance Standard 2 on labor and working conditions for employees, either directly or through sub-contractors or for operations that may be subcontracted by Suu.
Employees have the right to freedom of association and have the opportunity to collectively represent to the management any issues or grievances that they may have. Workers communicate with management through their production line supervisors. They can also approach the HR department in person or in writing. In line with the national labour law, the Company upholds and recognizes workers’ rights to form and to join workers’ organizations with a Suu staff union currently being represented by 7 members of Suu staff. In keeping with IFC’s Performance Standards, the Company will formalize the existing grievance mechanisms, including a system for regular formal interaction between Suu senior management and elected staff representatives and/ or union representatives.
Suu regularly trains staff to ensure they are operationally competent, including company-wide awareness and training schemes, from company-wide OHS training, to specific external training for specialist staff, including HACCP, ISO9001, microbiological testing and laboratory safety training. A tour of production facilities confirmed that working conditions were reasonable and clean.
Suu have not experienced any fatalities since the privatization process of the company began in 2002 and whilst injury and incidents are low across the Suu operations, formalized records require improvement. Suu has been in compliance with applicable regulatory requirements of Mongolian Labour Law 97, although there is variance between the Company’s regulatory obligations when compared to IFC Performance Standard 2. Specifically this includes, and as agreed as part of the ESAP, retaining a qualified external OHS consultant to work with Suu’s Safety and Environment manager to review and develop an implementation plan to achieve internationally acceptable standards for OHS for its employees and sub-contractors. The Company will review its training programs and implement standard operating procedures that specifically seek to mitigate workplace safety and driving safety risks. It is anticipated that the Company''s occupational health and safety performance will achieve consistency with applicable IFC policies and guidelines for the sector, only after recommendations from the external consultant are implemented.
PS3: Pollution Prevention and Abatement
Fresh water supply for the Suu facilities in Ulaanbaatar is metered and sourced from the local municipality, with water usage rates for 2009 at 107,417m3. Process waste waters are discharged to the municipal sewage system, with effluent volumes being determined by the local municipality on a ratio of usage basis (95%). Spoiled milk is used as part of curds production. Suu have been found to be in compliance with national discharge limits by the Water Supply Administration Agency. Waste water production is minimal at MCPs and MCUs, limited to wash down operations and groundwater cooling pumps. The IFC site visit identified that soak-away systems at the MCUs either required overhaul or redevelopment. Suu will ensure that all existing and planned MCUs, MCPs and milking parlors will include adequate soak-away facilities for wash down and cleaning operations. Animal waste will also be considered as part of the proposed milking parlor developments, with a supporting waste management plan being developed for existing and proposed milking parlors.
Electricity is supplied from the grid for both Suu’s production facility in Ulaanbaatar and off-site field locations, with 3,162,870kWh being consumed during 2009 with total greenhouse gas emissions being less than 10,000t/a. Suu’s production facilities are connected to the city district heating system, utilizing waster heat from Power Station 4 in Ulaanbaatar. As such, there is no onsite combustion required for boilers as part of the production process. However, future upgrades to the production facilities will incorporate energy efficiency measures into the upgrade design.
The United Nations Food and Agriculture Organisation has previously provided guidance and support on MCU development and construction, which incorporated energy efficiency measures in MCU design. Specifically, these energy efficiency measures have used dedicated bore wells to provide the initial first stage cooling medium for raw milk following arrival at the MCU. As part of future MCU development, Suu will assess the viability of using similar systems whilst considering aquifer resources. Where applicable, Suu will assess the viability and applicability of the water being utilized as a community resource, either for potable or agricultural uses.
A detailed asbestos survey to recognized international standards will be conducted by a qualified consultant as part of the production facility upgrade and IFC’s investment. An asbestos management plan will be developed and implemented as required in the instance that Asbestos Containing Materials (ACMs) are identified. In the event where the repair and encapsulation or removal and disposal of existing ACMs is required, the work should only be performed by licensed personnel following Mongolian regulatory requirements, or internationally recognized procedures.
As part of IFCs investment, a phased replacement of ozone-depleting refrigerants will be implemented at the Suu production facilities, facilities upgrade and trucking fleet. The company will develop a hazardous material management plan and will search opportunities continuously to use less hazardous or non-hazardous substances. A register of Material Safety Data Sheets (MSDS) for all hazardous substances will be also developed and maintained.
Suu will develop a waste management plan for all hazardous and non-hazardous wastes generated at the Ulaanbaatar production facilities, satisfying Mongolian regulatory requirements, IFC Performance Standards and Guidelines and consistent with international specifications. The plan will include an auditable change of custody procedure for removal of waste from the production facilities through to a final disposal facility licensed in accordance with national regulatory requirements.
PS4: Community Health, Safety and Security
The Suu production facilities are located in mixed-use (light industrial, commercial and residential) neighborhoods. The Borrower will review and update their existing emergency preparedness and response plan to handle fire, food safety and environmental emergencies. As previously indicated, there is no major expansion or acquisition of land as part of IFC’s investment. IFC’s review confirmed that the Suu facilities exercise a comprehensive access control with the Company employing unarmed security workforce to secure the facilities.
A key aspect of the Suu operations is the collection and transportation of raw milk supply. Currently, Suu operates 22 collection vehicles, with a number of these being scheduled for replacement. Given the distances covered daily by the Suu fleet, in varying weather conditions, IFC’s review has identified that the collection and transportation of raw milk is an area that carries an increased risk of incident, injury and fatality to both Suu employees and members of the community. In order to mitigate this risk, Suu will develop a transport safety procedure which will include a requirement for Suu drivers to attend and pass an internationally recognized Defensive Driving course (or similar) prior to undertaking any driving duties for Suu. The Company will also monitor driver blood alcohol levels which will be consistent with Mongolian legal limits (blood alcohol concentration of < 0.02%). Suu drivers will go on refresher training courses, including repeat testing, on a minimum basis of once every two years.
