30422 - Energomera II

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Environmental & Social Review Summary

Project Number

30422

Company Name

ZAO MONOCRYSTAL

Date ESRS Disclosed

Feb 4, 2011

Country

Russian Federation

Region

Europe

Last Updated Date

Apr 5, 2017

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : May 20, 2011
Signed : Jun 24, 2011
Invested : Sep 14, 2011

Sector

Electrical Machinery, Equipment and Components (Electric Lighting, Motors, Batteries, Insulated Wires and Cables, Fiber Optic Cable, Carbon and Graphite Products, etc.)

Industry

Manufacturing

Department

Regional Industry MAS LAC & EUR

Project Description

The project involves an IFC investment in two subsidiaries of OAO Concern Energomera (“Energomera Group”): namely OAO Monocrystal (“Monocrystal”), and ZAO Energomera (“Energomera”). Energomera develops and produces a wide range of electronic metering technologies and equipment. Monocrystal produces synthetic sapphires - the key substrate used in the production of light-emitting diodes (“LEDs”), and special materials used in the production of solar photovoltaic cells.

The loans will be guaranteed by the Energomera Group. The project contemplates extending A loans to Energomera for refinancing its short-term loans; and Monocrystal to support the growth of the two company''s operations in 2011 and refinance its short term loans.

Overview of IFC's Scope of Review

The proposed project would be the second IFC’s investment with OAO Concern Energomera (“Energomera Group”). The Energomera Group has two main business lines in Russia; OAO Monocrystal, ZAO Energomera, and beside this two minor business lines within agricultural equipment manufacturing and farming, and two minor assembly lines abroad.

The initial project financing was to the OAO Monocrystal subsidiary - one of the world’s largest producers of synthetic single crystal sapphire. Environmental and social (E&S) review of the earlier investment was conducted in 2008, a summary of which can be found at the following link: http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff1c/a36f49ac5bb9530c852576ba000e32db?opendocument&Highlight=0,Energomera

The initial investment has been regularly supervised and its E&S performance has been determined to be in material compliance with at-approval agreements. The company has completed all actions included in the E&S Action Plan. The most recent supervision visit to the Monocrystal operation in Stavropol by an E&S consultant on behalf of IFC was carried out in December 2010. During this supervision visit the consultant reviewed environmental and social (E&S) management policies and procedures; health and safety (HS) accident records; monitoring programs and data on air emissions, effluent discharges and waste disposal, covering the Stavropol and the parallel Monocrystal operation. in Belgorod (“Atlas”) with the help of the responsible company specialists.

The proposed investment will expand outside the scope of the initial investment by also providing funding to ZAO Energomera, a producer of a wide range of electronic metering technologies and equipment with two production facilities: ZAO Energomera – ZIP in Nevinnomysk and ETZ in Stavropol. Both were visited by an E&S consultant in 2008 during the appraisal of the first project with the Energomera Group. Recently telephone interviews with specialists in charge of E&S matters at the ZIP and ETZ facilities were conducted to get an update on the current E&S performance of these factories.

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: Labour and Working Conditions;
PS3: Pollution Prevention and Abatement;
PS4: Community Health, Safety and Security.

The proposed project will not lead to the expansion of the existing operations outside existing site boundaries, which were converted for industrial use decades ago, and, therefore, PS 5 through 8 will not be applicable for the actual project.

This proposed project has been developed in accordance with national regulatory requirements. None of factories operated by the Energomera Group are scheduled for major retrenchments, closure, or expansions outside existing site boundaries. This is a category B project according to IFC’s environmental and social review procedure, because potential adverse social and environmental impacts are limited and readily mitigable as described in the following sections.

Environmental and Social Mitigation Measures

PS1: Social and Environmental Assessment and Management Systems:
Monocrystal''s Stavropol operation has successfully integrated E&S compliance into the existing 9001 Quality Management System and obtained ISO 14001 and OHSAS 18001 certifications in February 2010, issued by TUV Nord. The management program of Monocrystal Stavropol defines performance indicators and annual targets in the area of E&S performance; and senior management is periodically updated on its effectiveness. Air emissions and effluent discharges are regularly monitored; and steps are taken to prevent OHS accidents and injuries. Last year 20 specialists of Monocrystal Stavropol were trained in environmental safety and internal auditing.

In accordance with the ESAP agreed under the first project, Monocrystal has carried out an environmental audit of the Atlas operations and has developed a Corrective Action Plan to comply with local regulations and meet the requirements of IFC’s PSs.

Production factories of ZAO Energomera are less advanced in E&S management. Its management system is focused on compliance with local permitting conditions and is limited to immediate response to upset conditions only. This also means that the training provided to employees with direct responsibility for E&S performance is below the standards expected by IFC. The operations are also in need of action plans for waste minimization, resource efficiency and improvement of E&S performance.

The management acknowledges the current lack of consistency in E&S management across the Group. Therefore IFC and the Energomera Group have agreed on an E&S Action Plan (ESAP) that includes the development and implementation of a corporate wide EHS Management System based on ISO 14001 and OHSAS 18001 standards. The aim of the corporate system will be to achieve uniformity in E&S policies and procedures across the Group similar to the Energomera Group’s current corporate HR management system.

PS2: Labor and Working Conditions
Energomera Group has a corporate HR management system and all employees in the group are covered by the same human resource policies. In addition to the requirements of the national legislation, terms of employment and dismissal, working conditions, wages and benefits for the Energomera Group’s employees are addressed in internal labor regulations and collective agreements. Freedom of association is also practiced and some groups of employees at ETZ and ZIP have organized in industrial trade unions. There is a strong program for training, and proactive efforts are taken to conduct surveys on worker satisfaction at the Group level.

Some minor deviations from the IFC requirements have been identified as the grievance procedure for employees conforms to the provision in Labor Code of Russian Federation, but does not fully meet the requirement of PS with respect to grievance mechanism. The Company and IFC have therefore agreed, and entered in the ESAP, that the Energomera Group will develop a unified corporate grievance procedure for workers to express themselves, either collectively or individually. The mechanism will involve an appropriate level of management involvement and address concerns promptly, using an understandable and transparent process that provides feedback to those concerned, with guarantee of no retribution. The Client will inform the workers of the grievance mechanism at the time of hire.

During 2009-10 the Group reduced headcount in response to the financial crisis. During this period 38% of all job were lost at ZIP (549 out of 1461) and 43% (425 out of 746) were lost at ETZ. The retrenchment process was conducted in accordance with national laws and in consultation with trade unions. Severance payments to employees were made in a timely manner. There were no claims brought to the court for unfair retrenchment. Going forward, having an appeal and grievance procedure as described above will strengthen the client’s capacity to follow Performance Standard 2 and manage the associated risks in case of any future lay-offs.

Occupational health and safety (OHS):
The Russian legislation stipulates that an employer should carry out hazard identification at all workplaces and implement necessary controls with further obligatory attestation of workplaces to verify their compliance with the requirements for safe working conditions. Most individual plants have completed this analysis of workplaces’ safety and elaborated specific action plans to eliminate the non-compliances and achieve the obligatory attestation.

The safety tracking record at the Group’s factories is well established and the data for the years 2008-10 were reviewed for all facilities as part of the project evaluation. While Energomera’s factories had 8 Lost-Day-Accidents (LTAs), there were no accidents at Monocrystal over the last three years. This statistics reflects Monocrystal''s successful works under OHSAS 18001 standard and emphasize on safety throughout its operations. It also indicates that Energomera has a significant potential for improving its performance as the certified EHS management system that has proved its value at Monocrystal are extended to other plants across the Energomera Group.

PS3: Pollution Prevention and Abatement:Air emissions:
Air emissions at the Group’s factories are limited. The most significant pollutants generated from on-site activities include carbon monoxide, nitrogen oxides and volatile organic compounds (VOC). Dust sources are equipped with secondary treatment. Direct measurements of emissions from point sources, performed once or twice a year, have shown compliance with local requirements. Other compliance information for the Group’s operations is based primarily on calculated emission levels.

Water consumption and effluent discharges:
Most of the Group’s factories are relying on the public water supply systems with some having additional private water wells. For most operations domestic waste water is delivered to the local municipal waste water treatment systems, sometimes together with pretreated process water. The individual factories carry out analysis of its waste water before it is discharged to municipal sewage systems to ensure it is within the norms these facilities can accept for treatment.

Wastewater management at Monocrystal is described in the earlier ESRS (a link is provided at the beginning of this document). During the appraisal of the first project it was identified that some pollutants in the storm water, which was discharged directly to the Medvedka river, were exceeding the local standards. The Company has since then, in agreement with the initial ESAP developed and implemented a Program to achieve local water quality requirements. As a result, the company in 2010 significantly improved the quality of its storm water by identifying the sources of pollutants and improved housekeeping to reduce these. Presently, the storm water quality is compliant with IFC requirements and slightly exceeds the more stringent local standard for hydrocarbons. The company will undertake further mitigation measures to achieve full compliance with the local requirements. In 2012 Monocrystal also plans to conduct a reconstruction of its internal WWTP to improve the quality of its pretreatment of production wastewater before discharge into the public wastewater treatment system.

Wastewater from electroplating at ETZ together with other process wastewater is pretreated at internal wastewater treatment plants before being discharged into the municipal wastewater management system. Galvanic sludge from this pretreatment (6 tons per year) is collected in a sludge tank and periodically removed by the licensed company for further treatment. Stormwater is discharged directly to the Mutnyanka River. The Storm water quality is compliant with IFC’s values but does sporadically exceed the stringent local standards for a number of pollutants. The factory will therefore undertake further measures to improve the storm water quality and ensure continual compliance with local requirements.

The electroplating operation at ZIP was discontinued in 2005. Domestic wastewater from ZIP and the limited industrial waste water from the production is delivered to the municipal waste water treatment system.

Hazardous materials management:
Monocrystal is using a number of hazardous materials (“hazmats”) for its production including different acids, VOCs, ammonia, etc. To further improve its hazmat management, the company is planning to construct new facilities for the storage of hazmats and a new site for filling of nitric acid within 2011-2012. Last year the company constructed a new storage facility for its aluminum powder. IFC and the Energomera Group have agreed in the ESAP that a HazMat Management Plan will be developed at Monocrystal to cover the procurement, transportation, use, storage and disposal of hazardous materials.

Greenhouse gas emissions:
In 2009 the combined CO2 emission from the Energomera Group has been estimated to 46,400 tons per year with the majority (94%) coming from indirect (Scope 2) emissions related to the operations electricity import from the national grid.

Solid waste management:
Some industrial waste streams at the Group’s factories are recycled. Non-recyclable solid waste streams are disposed at licensed landfills. Hazardous waste streams (e.g. used mercury lamps) are handled by the licensed contractors.

Last year, Monocrystal introduced a selective waste collection for its further recycling.

PS4: Community Health, Safety & Security:

There are no residents living around the plants, except for ETZ, where there are 30 households located within the 100 m buffer zone around the plant. Russian regulations prohibit permanent and/or long-term residence of people within the buffer zones to avoid risks to their health due to a potentially substandard ambient air quality.
The factory will undertake a regular monitoring of ambient air quality at residential area to ensure that it is consistent with national standards. Based on the results, the company will either develop a program on air emission reduction or engage with the regulators on the reduction of the size of the buffer zone to exclude residential area as agreed in the ESAP All factories have emergency response plans, approved by local authorities. The factories located in seismic zones (Sravropol, Nevinnomysk) have been designed according to the appropriate seismic norms.

Stakeholder Engagement

The implementation of the proposed project will not entail new land take or include specific risks or adverse impact to the local community. According to the local regulation the project will therefore not require any project specific public disclosure. The Energomera Group covered this type of project disclosure by including the project in its regular mass-media releases used for informing the surrounding communities about general plans and achievements. Energomera also has a public website, which is updated regularly to inform interested parties. Beside the production related information disclosure, Energomera engage in support for regional organizations, mainly public organizations, children sport clubs, war veterans etc.

Energomera will prepare and publish a summary of its environmental and social performance and the planned improvement actions in its corporate newspaper “Berezhlivoe proizvodstvo” (Lean production), which is distributed at all production facilities of the Group, and on its public website www.energomera.ru.

Further questions related to the environmental and social aspects of the project may be addressed to:
Michael Y. Zyulin,
Chief Engineer of ZIP Energomera
217, Gagarin street,
Nevinnomyssk, Stavropol region
357106, Russia
e-mail: ZyulinMY@energomera.ru

Client Documentation

File Name	Actions
ESAP_Monocrystal_30422.pdf
ESAP_ZAOEnergomera_31060.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).

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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