The potential adverse ESHS risks and impacts of individual construction projects to be supported by the Facility will depend upon each specific project’s characteristics. At the time of appraisal, the preliminary list of CNO’s projects that could be considered under the Facility included: (a) Hermanas Mirabal Acueduct – Category B project – water supply project in the Dominican Republic (DR), (b) Duarte Corridor – Category B project – urban traffic improvements in Santo Domingo, DR, (c) Highway BA 093 System – Category B project – improve and operate existing highway – Bahia State, Brazil (BR) (d) Suape Expressway – Category B project – improve and operate existing highway section of 44 km – Pernambuco State, BR (e) Porto Maravilha – provisional Category A project – Rio de Janeiro, BR (f) Corinthians Arena – Category B Project – Sports arena in São Paulo, BR (g) Recife Arena – Category B Project – Sports arena in Recife – Pernambuco, BR (h) Teles Pires Hydro power – Category A Project – Construction of a 1820 MW plant in the Teles Pires river – northern Mato Grosso State, BR (i) Papagayos – Malargue gas line – provisional Category A Project – Construction of a 160 km of gas line in the Mendoza province, Argentina, and (j) Águas de Benguela – Category B project – Expansion of water supply system in the Benguela province, Angola.
The sections that follow describe how CNO will manage potential ESHS impacts and risks in the underlying construction services to be supported by the Facility. Mitigation measures necessary to ensure compliance with the IFC Policy and Performance Standards on Environmental and Social Sustainability are summarized herewith and in the accompanying Environmental and Social Action Plan (ESAP – see Annex 1).
PS1: Social and Environmental Assessment and Management Systems
CNO Corporate ESHS Management System (ESMS): For over 15 years, CNO has had a clear corporate ESHS management practice, which has been improving and becoming more sophisticated and strict over the years to meet society, host government as well as financial institutions’ needs, requirements, and values.
In November 2008, CNO formally issued its Sustainability Policy (See Annex 3) which clearly and publicly mandates and acknowledges the need to include economic, environmental, and social components in all of CNO’s activities, and to assure an articulated respect for cultural diversity and participatory processes. This Policy is supported by the Integrated Sustainability Management System (ISMS) and is founded in five “Directives”, namely: Environment, Climate Change, Social Programs, Occupational Health, and Health Promotion and Safety (See Annex 4). The Integrated Sustainability Management System Manual (Manual do Sistema Integrado de Gestao de Sustentabilidade – See Annex 5) details the principles and procedures needed to assure compliance with the Sustainability Policy as well as with these five corporate Directives.
Even though the Manual has been implemented and applied at the project-level for years, it was reviewed in September 2010 following approval of the Directives, and it is now mandated in all CNO’s engineering and construction business. It provides ESHS instructions and indicators to be applied at each project, which commences by designing and customizing a project-specific Integrated Sustainability Program (Programa Integrado de Sustentabilidade or PI - Sustentabilidade). The PI-Sustentabilidade is envisioned and designed taking into account project specific characteristics and their inter-relations with the five Directives, integrating local applicable ESHS legal and license requirements, contractual obligations, and agreement with financiers, with community and stakeholder engagement, environmental protection, resource efficiency and overall sustainable economic development. It should be noted that the ISMS Manual specifically articulates IFC policies and Equator Principles, as fundamental references towards CNO policies and good practices.
Coherent with the IFC’s Policy and Performance Standards on Social and Environmental Sustainability, CNO’s Environmental Directive specifically states that the environmental and social impacts and risk must be assessed and managed for all CNO projects. As ruling principles, this directive includes (a) compliance with host country applicable environmental laws and regulations, (b) identification of potential impacts and development of mitigation measures commensurate to potential impacts and risks and compatible to best practices, (c) promotion of public consultation and community engagement and participation, (d) resource conservation and efficiency.
This directive provides guidance associated to the different development phases of the project, and includes an early classification of the potential social and environmental risk. As soon as a given project enters CNO’s pipeline, it must be classified as Category A, B, or C, to reflect the degree of potential environmental and social impacts and risks – A being highest level of impact. This classification is provided as soon as a given project officially enters CNO’s pipeline (e.g. an administrative cost center is created in CNO’s internal tracking system), and defines the complexity and the content of the PI-Sustentabilidade required, as well as the qualification of the ESHS team to be deployed, and the degree of involvement from CNO’s ESHS Corporate Management. For Category A projects, the Manual specifically requires the involvement of an external consulting firm to help with the ESHS assessment and management, as well as the design of the project’s PI-Sustentabilidade. Category-A projects are closely monitored by CNO’s ESHS Corporate Management and during construction are visited at least once a year, depending on the degree and the regional scale of the ESHS impacts.
Each project’s PI-Sustentabilidade must include (i) policy and guiding principles, (ii) organizational structure, (iii) ESHS impact and risk assessment process (See Annex 5.1), (iv) ESHS management plans and procedures, (v) emergency planning and preparedness, (vi) monitoring and documentation, (v) internal auditing procedures with principles of total quality and continual improvement, and (vi) external consultation, communication and grievance mechanisms.
It is important to note that CNO’s ISMS holds ISO 14.001 (environmental management) and OHSAS 18.001 (health and safety management) certification covering all hydroelectric and thermal power plants greater than 100 MW capacity, petrochemical sector, and oil and gas operations. Maintenance of such certifications implies that the granting body performs bi-annual formal audits and site visits to active CNO projects in these four sectors.
At time of appraisal, CNO had a total of one hundred and thirty seven (137) active projects under the Corporate ISMS, and based on their potential ESHS impacts and risks, 26 projects were categorized as A, 55 as B, and the remaining 56 as category C projects.
Organizational Structure: CNO is a highly decentralized Company. Each project or contract is managed individually, with delegated authority, reasonable autonomy, and limited direct input and control from CNO’s corporate structure. Contract managers have the responsibility to develop project-specific environmental, social, and health and safety (ESHS) plans and procedures, as well as allocating ESHS personnel with relevant expertise. Given this decentralized operational practice, and to assure a coherent and consistent approach on the management of ESHS impacts and risks of different individual projects across countries and sectors, CNO has a Corporate ESHS Management Department. This Department has developed CNO’s ESHS policies, guidelines and procedures, and it is responsible for (a) assuring compliance of global projects with corporate policies, guidelines and procedures, (b) providing individual project with technical advice and guidance on complex ESHS issues, (c) designing and executing periodic supervision and monitoring program of all projects, (d) detecting -and supervising corrective actions- any violation or breach of such guidelines and procedures, and (e) documenting and reporting ESHS performance at the corporate level. When violations or breaches occur, the Corporate ESHS Management Department directly acts with the project or contract management –or when needed CNO’s upper management- to correct such breaches and prevent any re-occurrence. Consequently, decentralization does not imply there is license or possibility to breach corporate-wide policies, guidelines or any other environmental, social or health and safety requirement.
ESHS is managed at the corporate level by a team of fourteen (14) professionals, including the Corporate Manager. This team is responsible for developing and improving guidelines and procedures, assisting contract managers when necessary, and supervising proper environmental and health and safety practices. The corporate team is also responsible for maintaining and updating CNO’s database on best practices and operational procedures, which is available via intranet to all contract managers globally.
Additionally, each contract has as a minimum two professionals responsible for the implementation of the PI- Sustentabilidade, including an environmental mitigation and control specialist and an occupational health and safety officer. At the time of appraisal, CNO had one hundred and thirty seven (137) active construction contracts and an estimate of one thousand (1000) ESHS professionals globally.
Monitoring and Reporting: The ISMS manual includes a series of procedures that guide CNO’s supervision of ESHS compliance in all active construction projects. The general monitoring framework is outlined in CNO’s Procedure for ESHS Supervision (Annex 6) which defines three general areas used to assess projects ESHS performance: (a) General Supervision, which includes components such as degree of implementation and performance of the PI-Sustentabilidade, compliance with local regulation and other contractual requirements, results of internal audits, and qualitative and quantitative indicators; (b) Monitoring, which essentially focus on compliance with target air and noise emissions, liquid discharges, and waste quantities and qualities, and (c) Performance, which measures management commitment, compliance with CNO policies and procedures, quantity and effectiveness of preventive ESHS investments, people development and training, and client’s feedback. This procedure is supported by various detailed checklists, indicators, and targets (See Annexes 6.1, 6.2, 6.3, 9 and 9.1). These indicators and corporate targets are used to evaluate individual projects’ ESHS performance, and include compliance with local regulations; pollution prevention and other environmental control plans and procedures; monitoring programs; eco-efficiency practices; compliance with CNO environmental and social guidelines, practices, and polices; interaction with affected communities; as well as accidents and incidents (with and without loss time). Each project ESHS project manager performs a self-evaluation, which generates numeric results from 1-100 consolidating the weighted indicators. These weighted results are sent every quarter to the Corporate ESHS Department, which compiles all the reports and defines the need for more information, and whether a given project needs to be visited or supported by the Corporate ESHS staff or specialized consultants. Based on these indicators, individual project ESHS performance is ranked in one of five possible grades: insufficient <60, regular <60-70, good 70-80, very good 80-90, excellent >90. These ranks are used by CNO’s ESHS Corporate Manager to detect projects that may need special attention or corrective actions. Furthermore, at the end of each calendar year, CNO’s global ESHS performance is reported back to management via an Internal Annual Sustainability Report (Annex 6.4), including performance against pre-determined yearly corporate goals, successes, trends and areas of improvement. Also based on these indicators, the Corporate ESHS Department designs the annual supervision program, which involves a representative pool of CNO’s active portfolio. During 2010, a total of 13 Category A and 10 Category B projects were subjected to supervision visits, either by external consultant or directly by professionals from the Corporate ESHS Department. In 2010, 49 projects were classified as excellent, 56 as very good, 24 good, 4 regular, and 4 insufficient. Insufficiency applies when a project, for example, does not have an environmental permit. Although uncommon, this situation may happen in certain countries.
Procedures for Performance Standards 3 - 8: The following sub-sections describe additional aspects that are relevant to CNO’s subprojects’ compliance with specific IFC Performance Standards, including Pollution Prevention and Abatement, Community Health, Safety and Security, Land Acquisition and Involuntary Resettlement, Indigenous Peoples, Cultural Heritage, and Biodiversity Conservation and Sustainable Natural Resource Management, which are specifically articulated within CNO Sustainability Policy and its five supportive Directives.
Coherent with PS3 on Pollution Prevention and Abatement, the ISMS Manual includes extensive corporate procedures that are used as reference by each project manager to develop the project-specific PI- Sustentabilidade. These include (a) procedures to remove forest and vegetation cover, (b) solid waste management, (c) earth movement, cuts and soil disposal, (d) water sources allocation and management, (e) management of hazardous materials and waste, and (f) optimization of GHG emission, among others. One of the main reference instruments for specific project to use in the design and implementation of their project-specific PI-Sustentabilidade is the “Kit Canteiro”, which provides generic ESHS procedures for activities typically associated with the installation of infrastructure construction worker camps. Specific procedures include: (g) design and construction of sanitary controlled landfills, (h) design and construction of facultative and aerobic ponds for waste-water treatment, (i) oil-water separators for equipment and maintenance wastewater, fuel tanks, storage tanks, and safety spill prevention containment tanks, (j) project design and installation of sanitary septic systems, (k) project design and installation for medical (from medical posts) and odorous waste incineration, (l) spill prevention and control measures, (m) erosion and silting control measures, (n) water, wastewater and solid waste monitoring programs, (o) environmental monitoring programs, (p) compliance monitoring programs, and (q) list of service providers. The “Kit Canteiro” was reviewed in 2010 and re-launched in its updated and enlarged format in March 2011.
In addition, Climate Change is one of the five Directives supporting CNO’s Sustainability Policy, which specifically calls for CNO to join global efforts towards climate change mitigation and adaptation. CNO has a Climate Change program composed of three components: (a) GHG emissions inventory, (b) reduction of GHG emission and overall corporate climate foot-print, and (c) fostering opportunities in the Carbon Emissions Reduction market.
Based on this Directive, CNO and all of its projects are mandated to calculate and report on their GHG yearly emissions. In December 2010, CNO completed the GHG Inventory Manual (Annex 7), which dictates the methodology to be used at the corporate level as well as in individual project. The methodology is based on the GHG Protocol developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) and the ISO 14061-1 Norm, and requires mandatory Scope 1 and 2 quantification, and optional Scope 3. This newly developed Manual includes detailed formulas to calculate GHG emission from: (a) stationary combustion (e.g. energy generators, static engines), (b) mobile combustion sources (e.g. trucks and cars), (c) cooling systems, (d) use of explosives, (e) waste disposal, (f) waste water treatment, (g) CO2 and acetylene welding, (h) deforestation, (i) re-forestation, (j) air travel, (k) cement and steel production, and (l) electric energy consumption. The first full annual inventory was concluded in December 2010 and the results made available in April 2011 with an estimate of 1,120,884 tCO2e GHG for a total of 117 construction projects. As part of the Action Plan, the IFC will require that all projects under the Facility provide annual GHG inventories. (See Annex 7.1 for summary of the GHG inventory conducted at all construction sites in 2010.)
Even though no concrete corporate GHG emission reduction targets have been established yet, in its Climate Change Sustainability Policy Directive CNO clearly articulates the need to prioritize renewable sources of energy as well as low-carbon footprint raw materials, and includes energy efficiency programs, cost-benefit analysis for alternative sources of energy and raw materials, and training in all project-specific PI-Sustentabilidade.
With regard to PS4 Community Health, Safety and Security issues, CNO standard manuals and procedures include guidelines associated to infrastructure and equipment safety, limit or controlled public access to construction sites, appropriate use of signals and physical barriers, separation of pedestrian ways from heavy equipment and vehicle road, defensive driving, among other. CNO also has an AIDS policy that recognizes the risk for contamination with the HIV virus, establishes employee education for appropriate protection and preventive measures, and is based on non-discriminatory and privacy protection principles.
Aspects associated to Involuntary Resettlement, Indigenous Peoples (IP), and/or Cultural Heritage, are typically excluded from CNO’s contractual scope and generally are the client’s responsibility. However, in the event of direct involvement with these issues, within the Sustainability Policy Social Programs Directive, CNO has corporate principles and guidelines for Involuntary Resettlement, Indigenous People and Cultural Heritage. These principles and guidelines specifically reference World Bank and other multilateral banks applicable Policies, IFC Performance Standards, and the Equator Principles.
In terms of PS5 - Land Acquisition and Involuntary Resettlement aspects, CNO’s Policy Directive includes the principle to avoid any physical and/or economic displacement as much as possible, and when inevitable, it provides guidelines that must be included in the project-specific PI-Sustentabilidade to assure all affected people are consulted, engaged and their opinions are taken into account, and that a resettlement plan is designed to compensate all those eligible people in a way that either restores or improves their original shelter and/or income conditions. This guideline states that the resettlement plan must have clear supervision procedures and mechanisms to correct any shortcoming or breach, and it is generally consistent with the objectives of PS 5.
With regard to PS7 – Indigenous Peoples (IP) issues, the Social Program Policy Directive defines IP in a coherent manner with PS7, and includes the principle of (a) avoidance of any negative impact on IPs and/or territories, and when inevitable principles of (b) informed and good faith culturally adequate negotiations, and (c) preservation of non-contacted IPs. This Directive provides specific guidelines to be followed and included in the project-specific PI-Sustentabilidade, such as baseline data, assessment of impacts, broad and culturally adequate consultation, mitigation / compensation measures, responsibilities, and reporting and monitoring.
Similarly this same Directive expressly defines Cultural Heritage (PS 8) and outlines the ruling principles of (a) avoidance and preservation of any cultural property in accordance with local law and best practices, (b) appropriate consultation and engagement of affected community and other interested parties / stakeholders, and (c) enhance any value of cultural properties and promote economic benefit sharing among affected communities. This Directive also provides specific guidelines to be followed and included in the project-specific PI-Sustentabilidade, such as proper assessment of potential impacts on cultural heritage, compliance with local laws, standard chance-find procedures, adequate mitigation measures / value proposition, responsibilities, and reporting and monitoring.
Finally, with regard to PS6: Biodiversity Conservation and Sustainable Natural Resource Management issues, CNO’s Environmental Policy Directive only has a single statement that calls for avoidance of conservation units, protected or environmental sensitive areas, and negative impacts over endangered species.
Environmental and Social Action Plan (see ESAP Annex 1): As part of the ESAP, CNO will perform a detailed gap-analysis between its current Sustainability Policy and supporting ISMS/Manual and IFC’s PS4 on Community Health, Safety and Security and PS6 on Biodiversity Conservation and Sustainable Natural Resource Management. Based on this gap-analysis, CNO will commit to develop additional “orientation” or “guidance” to complement its existing plans and procedures to assure these aspects are fully assessed for all underlying projects and managed in full compliance with IFC PS.
Additionally, building on CNO’s existing Sustainability Policy and supporting ISMS and Manual, the ESAP includes the development of a customized Facility Environmental and Social Impacts and Reputation Risk Management Scheme (RMS), which will not only clearly outline underlyining project’s Eligibility Criteria, but also the environmental and social screening procedure, ESHS requirements, supervision, and reporting.
PS2: Labor and Working Conditions.
Human Resources and Labor: The Odebrecht Organization that encompasses CNO holds a Code of Ethics applicable to all its business whereby conditions of non-discrimination are clearly established for hiring and career development (Annex 8). As of December 2010, CNO had a total work force of 131,540 employees, including 60,868 permanent staff, 31,549 employees associated via consortiums, and 39,123 sub-contractors. The work force was almost equally distributed between Brazil and the rest of the world, with 67,700 direct and indirect employees in Brazil and the remaining 63,840 employees internationally.
CNO’s payroll is 90% male and 10% female. At the Director’s level there are only 9 females as opposed to 414 males. Even thought this is not unusual for a construction company, CNO is committed to foster greater opportunities for females in the workplace, and promote more qualified female employees to higher responsibility positions. Gender equality and diversity in culture are part of Odebrecht''s commitments under the Code of Ethics and its vision towards the future. The Santo Antonio HHP is an example of this effort. The Acreditar Program had in April 2011 a total of nearly 64.000 applicants. Nearly 18.000 were women. Approximately 10% of the current labor work force in this project is female and was hired from the Acreditar Program. This proportion doubles the average for the construction industry sector in Brazil, which is below 5%.
Aligned with this PS and its practice to work with unions and bargain collectively, in 2010 alone CNO signed a total of 76 collective agreements with labor unions in Brazil. These negotiations are not always free of conflict, but CNO has extensive experience and a good reputation on resolving any issues with unions. For instance, in the first quarter of 2011 the two major Brazilian construction workers unions, CUT and Força Sindical, launched a major strike which stopped works for weeks in several major large construction projects across the country, including CNO’s Santo Antonio HPP. The strike was violent and was initiated upon alleged lodging conditions, repression and isolation of construction workers and demand for better salary and benefits at the Jirau Hydrolectric Project in the Madeira River. Even though CNO has no relationship with the Jirau HPP, Santo Antonio HPP is located approximately 120 kilometers from it. Since the two unions involved in the strike at Jirau are the same unions that CNO works with in the Santo Antonio HPP, CNO’s management –in agreement with the unions- decided to stop activities as a precaution to avoid spreading the unrest. After two weeks of negotiations, Santo Antonio resumed construction activities and is now under regular operations. At time of appraisal Jirau HPP remained inactive.
Health and Safety: In order to mitigate risks and manage occupational health and safety within its operations, CNO has developed and implemented, as part of the Integrated Sustainability Management Manual, a very detailed set of Health and Safety and Occupational Health plans, procedures and indicators. These procedures are designed on the basis of OSHAS 18001 principles.
In terms of Safety, CNO assures that all contracts apply industry best safety practices at work/construction sites to prevent accidents, and includes workers training, and accident record keeping. CNO has developed a system to monitor and supervise health and safety aspects on all contracts (both in Brazil and abroad) and relies heavily on a monthly report prepared by each Contract Manager. This monthly report consolidates all pertinent statistics (accident records, etc.) and transforms them into a series of CNO-customized performance indicators. (See Annex 9 and 9.1) These indicators are closely monitored and they affect the contract management team’s premium remuneration at the end of the contract. A team of 205 safety engineers currently staffs this area, 107 working in Brazil and 98 abroad.
CNO also has a Occupational Health and Health Promotion program which includes employee/worker entrance physical exams, monitoring of the health conditions of workers/employees to assure good working environment, actions to avoid spread of contagious or sexually transmitted diseases, providing proper ergonomic conditions, and hearing and visual protection. A team of over 130 medical doctors staffs this area, and helps monitor workers health. A monthly report with CNO-customized indicators is compiled, and as with occupational health indicators, performance is tracked and taken into account towards team’s premium remuneration.
The 2010 Internal Sustainability Report provides the expected targets for key Occupational Health and Health and Safety indicators such as LTI, incidence and severity rates, number of fatalities, hearing health, rate of repetitive-motion injuries, rate of work related injuries, occupational and non-occupational absentee rate hours. For 2010 all key Health and Safety targets were met both in Brazil and Internationally. On the other hand, for 2010 two important Occupational Health targets with an expected target of zero were not met, with 19 fatal accidents and 14 accidents with permanent injuries, representing a 25% increase from the previous year, and the largest incidence since the year 2000. Additionally, in the energy sector in Brazil both severity rate and incidents with and without lost time also exceeded the corporate targets. To correct this unfortunate trend, CNO has already launched a program called “Pre-Ver” to increase a preventive culture, detect potential gaps in project-specific
PI-Sustentabilidade, and assure corrective actions are implemented prior to further fatalities, injuries, and/or incidents occur. This program specifically focuses on controlling high risk situation that could cause accident of significant magnitude and damage potential.
