31030 - PMC Serbia

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Environmental & Social Review Summary

Project Number

31030

Company Name

PMC AUTOMOTIVE DOO KRAGUJEVAC

Date ESRS Disclosed

Feb 8, 2012

Country

Serbia

Region

Europe

Last Updated Date

Jun 12, 2021

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Mar 22, 2012
Signed : Mar 30, 2012
Invested : May 11, 2012

Sector

Motor Vehicle Parts

Industry

Manufacturing

Department

Regional Industry MAS LAC & EUR

Project Description

CLN Group, and Proma Group, two Italian automotive suppliers (the “Sponsors”) have jointly invested in Serbia in a greenfield metal stamping and assembling factory (the "Project"). The Project will be located in Grosnica, a supplier park dedicated to FIAT, the main customer, which has established a new plant in Kragujevac.

FIAT’s current production capacity in Kragujevac of 20,000 cars/year is expected to grow to 140,000 cars/year by 2013 and potentially 300,000 cars/year by 2015. The Project will produce for FIAT, seat structures, safety components and systems, suspension components and car jacks, with manufacturing processes including press, assembly and painting. The plant is expected to create 367 skilled jobs.

Overview of IFC's Scope of Review

IFC’s environmental and social review of this project included: a site visit to the facility under construction in Kragujevac in central Serbia, review of plant specification descriptions including performance data from similar equipment installed in other similar facilities, and interview at the facilities of the future production manager, who is involved in the quality control of the equipment being installed.

E & S Project Categorization and Applicable Standard

PS1: Social and Environmental Assessment and Management System
PS2: Labor and Working Conditions
PS3: Pollution Prevention and Abatement

While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have specific impacts which must be managed in a manner consistent with these Performance Standards.

PS4 is not specifically relevant to this project for the following reason: The Project site is located within a dedicated industrial park in Kragujevac. To the east of the Project there is an area still containing empty military barracks, to the north and south the Project has other supplier production plants (not belonging to PMC Serbia). To the west the Project is facing the supplier park’s large parking area and only on the other side of this area are there residential properties. The plant will receive its raw material by truck, and the final products will be moved to the FIAT car manufacturing plant by the dedicated supplier park to FIAT plant connection road. The Project’s impact on the surrounding communities is therefore minimal and it will be part of the general measures taken to ensure the supplier parks sustainability.

During the appraisal the land acquisition process was reviewed and found to be a willing seller / willing buyer situation with no impacts related to Land Acquisition and Involuntary Resettlement (PS5), no Biodiversity Conservation or Sustainable Natural Resource Management related impacts (PS6), 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 is being developed in accordance with national regulatory requirements and international standards by a Sponsor committed to good environmental and social management. The project has primarily local and international raw material supply, will follow international labor standards, and will have minimal of emissions and discharges from controlled sources. As documented further in this document there is no involuntary resettlement. With no indication of impacts related to Performance Standards 4, 5, 6, 7 and 8 and only readily mitigated environmental issues under Performance Standards 1 through 3 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.
The environmental and social risk associated with the proposed project is minimal, as described in the following sections, and mainly relates to the assurance of appropriate implementation of already proven systems and technologies. The mitigation measures agreed with the Sponsor are therefore focused on two aspects: 1) Implementation of appropriate HR Policies in accordance with local regulations and PS2, and 2) verification of expected emission and discharge parameters after stable operation conditions has been achieved. The mitigation measures are included in the Environmental and Social Action Plan (ESAP).

PS1: Social and Environmental Assessment and Management System

The approval procedure in Serbia for a combined production facility like FIAT’s new production plant with supplier park, of which the Project is a part includes several steps as now described. After acquiring the land, which for the supplier park was an area of abandoned military barracks, and achieving the correct (industrial) status of the land a construction project can be prepared and construction permits can be given. This step has been followed by a process of specific project descriptions and approvals for each unit, of which the Project is one, in accordance with the specific issues related to the unit''s characteristics. Since the stamping, assembling, electric welding, and water based painting operations carried out in the Project has minimal and well known environmental effects, that can be easily mitigated the Project did not need to prepare a formal and detailed EIA, but rather achieved its approval based on documentation that the Project''s individual units will perform in accordance with local and European Union rules and regulations.

Given the projects simplicity the project''s Social and Environmental Management System will be based on adherence to E&S control principles proven sustainable at similar production facilities belonging to the Sponsor. This includes an occupational health and safety system modeled over the OHSAS 18,001 principles.

PMC had outsourced the, now practically completed construction operations to reputable contracting companies. At the same time PMC had international staff on site since the initiation of the construction and this staff has closely followed and inspected the performance of the contractors.

The 40,000 square meters site on which the Project is located is part of the "supplier park" managed under the FIAT car manufacturing plant project and was formerly a military barrack area with no civil usage. Fiat has achieved land use right for the military barrack area as well as a narrow corridor for the establishment of a direct access road from the supplier park to the actual car manufacturing plant in a deal agreed with the owning Serbian authorities. FIAT has then sublet, to the individual supplier projects fenced land spots in accordance with their individual land size needs. The establishment of the Project is therefore on land achieved in a willing seller / willing buyer process and has not caused any resettlement.

PS2: Labor and Working Conditions

Once operating to full capacity the PMC facility in Kragujevac will have 367 employees.

- Human Resources Policy, working conditions:
The Project, which has only recently hired a Human Resource (HR) Manager and is only to start the hiring process now has not yet prepared its Human Resources policy, but has committed to ensure compliance with national labor regulation and PS2. Serbian labor laws are in all main respects similar to PS2 and the new HR Policy will define 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. In accordance with the Environmental and Social Action Plan the Project will submit its draft HR Policies to IFC for review within three months of commercial operations start and ensure their management approval, in final form within six month of commercial production start.

- Occupational health and safety:
The Sponsors have similar production facilities in other countries. These production facilities are, like the Project highly automated and primarily robot based operations within enclosures. This means low human interference with the actual production activities, and therefore low probability of human impact during the normal operation. Further all operations have individual overhead fume extraction and appropriate air filtering before emission. The painting operation is based on a water based process, and again with full waste water treatment before discharge to the municipal sewage system for potential final treatment.

- Emergency Preparedness and Response:
The operations are carried out by water sensitive robots, and with the usage of electric welding under protective argon blanketing and specific fire protection activities are therefore applied. Beside this the production building has fire water stands and hoses around the full area.

PS3: Pollution Prevention and Abatement

The activities carried out at the Project has low pollution potential and each unit operation is further equipped with suction hood and emission control, or wastewater treatment as appropriate.

The initial step of the operation is the receiving of steel coils and stamping of the parts to be used in the production. The stamping machines have automatic collection of waste steel from the process and this material will be sold back to the steel plants as scrap. Any liquid waste from the stamping machines will be collected and handled by licensed operators. The stamping machines, which have noise levels of up to 90 dBA, are in a separate enclosure surrounded by noise absorbing sandwich panels. The usage of Personal Protective Equipment (PPE) for anyone entering the stamping area will be mandatory.

The assembly and welding operation will be carried out in a process mainly controlled by robots. The welding is electric welding carried out under an argon blanket. Each unit is enclosed for protection and has its individual suction leading any welding gasses to the central emission control and venting system. The noise level in this area will be kept below 85 dBA and the area is also in a noise protected sandwich panel enclosed production hall.

The final process of some parts is water based painting and drying of the produced parts. This process is also carried out in a dedicated area with separate emission and discharge controls. Although the process wastewater is treated onsite to acceptable discharge concentrations it is discharged, together with domestic sewage from the Project to the municipal sewage system for potential further treatment.

The heating of the production building in the winter season will be from a high efficient gas fired radiant heating system. This system is expected to reduce energy required for space heating by 25-30% compared with a conventional building heating system, as the heat will be provided exactly where it is required.

Stakeholder Engagement

The plan for the overhaul and revitalization of the former Zastava car manufacturing plant, to become a modern FIAT car production plant has been subject to full disclosure as part of the political process for land use plan changes within the city of Kragujevac. This planning and disclosure included the establishment of the adjacent "supplier park" of which the Project is an integrated part.

Client Documentation

File Name	Actions
20120207 PMC 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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