While all Performance Standards are applicable to this investment, IFCs 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. If IFCs investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards

PS 1 – Assessment and Management of Environmental and Social Risks and Impacts
PS 2 - Labor and working conditions
PS 3 - Resource Efficiency and Pollution Prevention
PS 4 – Community Health, Safety and Security
If IFC’s investment proceeds, IFC will periodically review the the project’s ongoing compliance with the Performance Standards
SAME Croatia facility has been operational for nearly 30 years at its current location in an established industrial area outside Zupanja town, approx 270 km from the capital Zagreb. The proposed Project does not require any new land or construction. There are no impacts on biodiversity, cultural heritage or indigenous people. As such, issues related to PS5: Land Acquisition and Involuntary Resettlement, PS6: Biodiversity Conservation and Sustainable Natural Resource Management, PS7: Indigenous Peoples and PS8: Cultural Heritage are absent from this project.

This is a category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards and guidelines.

Key environmental and social issues associated with this Project include: SDF''s corporate approaches to management of environmental, occupational health and safety and social issues, SAME Croatia’s management of environmental and occupational health and safety during the manufacturing and assembly operations, labor and working conditions including workplace air quality and noise, energy efficiency, emissions to air, use, treatment and discharge quality of liquid effluents and management of solid and hazardous waste.

IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFCs requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives. The Sponsor and the Company have presented plans to address these issues and impacts to ensure that the proposed Project will, upon implementation of the specific agreed measures, comply with the environmental and social requirements including: the host country laws and regulations; IFC’s Performance Standards; and the World Bank Group (WBG) environmental, health and safety (EHS) guidelines. The information about how these potential impacts will be addressed by the Company is summarized in the paragraphs that follow.

IFC’s assessment considered SDF’s management of its EHS performance in the establishment and operation of its facilities; compliance with national and local permit requirements; and SDF’s engagement with local communities as well as its suppliers, regarding EHS performance.

- Environmental & Social Assessment and Management Systems:

SDF has developed an integrated quality, environmental, occupational health and safety policy at the corporate level, covering all its facilities.

In its bid for accession to European Community, in the recent years, Croatia has remodeled its regulatory regime, and the new EHS regulations and procedures are now similar to those in EU. As such, Company’s EHS compliance with local regulatory requirements means a de-facto compliance with stringent EU regulations.

SAME Croatia facility is well established and operational for nearly 30 years now. The proposed Project does not involve any new construction or development; hence a formal Environmental Impact Assessment is not required. However, as a part of an elaborate permit renewal process, SAME Croatia is required to regularly assess the E&S and safety aspects of its operations. Accordingly, Company has developed detailed environmental and safety rule books and undertakes risk assessment of its activities every year as a part of local regulatory requirements.

SDF has initiated a group-wide a program for implementing Environmental Management System (EMS) compliant with ISO14001 and Occupational Health and Safety Management System (OSHAS) compliant with OHSAS18001 standards. SDF has recently got its Treviglio facility certified for its EMS and OSHAS, and has set a target for the certification of all its facilities by 2015. While SAME Croatia has already received ISO9001 certification for its quality management system (QMS), as part of this corporate initiative it expects to obtain ISO14001 and OSHAS 18001 certifications in near future. However, as a result of various regulatory requirements, SAME Croatia already has a functional and effective management system in place though without third party certifications.

- Organization:

SDF has appointed a dedicated EHS officer at corporate level to oversee and coordinate safety and environmental management across all the facilities in the group. In addition it has a dedicated resource as Management Representative to oversee the implementation of management system across all the facilities.

At facility level, a dedicated Health, Safety and Environment manager is responsible for the EHS matters and compliance for SAME Croatia. This person is supported by external consultants retained by the Company and reports to the Plant Director. Heads of Maintenance and HR departments assist the production head to ensure compliance related to environmental and labor aspects.

- Monitoring & Reporting:

SAME Croatia undertakes monitoring of process effluent, domestic effluent, stack emissions, workplace (temperature, noise and humidity), and ambient air quality. In addition, elaborate monitoring system for safety related information (accidents, lost man-days, near misses etc.), and monthly reports are submitted to SDF as well as local regulatory agencies. Going forward, Company will regularly report to IFC about its EHS performance, including its compliance with IFC Performance Standards and WBG EHS Guidelines.

- Managing Supply Chain:

SDF has adopted a global sourcing system across the group. Accordingly, the supply chain for SAME Croatia is managed by SDF at corporate level. SDF follows an elaborate supplier evaluation process, to assess each vendor for its quality, HR, planning, logistics, legal compliance, audit quality etc.

At the moment, much of SDF’s supply chain is in Europe and EHS aspects are not considered in the supplier evaluation. However, in line with its localization strategy, SDF and SAME Croatia are expanding their supply chain beyond Europe to the emerging economies. Recognizing potential EHS risks in the supply chain in these markets and in accordance with the requirements of its newly established EMS, SDF will enhance its vendor evaluation program to include EHS and labor compliance aspects in the evaluation of its supplier base.

SDF currently employs approximately 2,800 staff globally. SAME Croatia employs 180 permanent employees and around 145 temporary workers during peak season of February to July.

- HR Policy, Management and Training

HR departments for SAME Croatia has various documented HR procedures covering terms of employment and working conditions including procedures for hiring, salary and compensation, probation, training, performance review, promotion, grievance redressal. These are modeled on the corporate HR policies of SDF, which are applied across the Group with necessary localization. The HR procedures are consistent with the national labor laws and IFC PS2 requirements.

A workers’ union is present at SAME Croatia with majority of workers - both regular and temporary - as its members. The union is affiliated to Croatian Metallurgical Union.

As per the occupational safety law, and risk assessment for each working place each employee has to undergo mandatory safety training at the time of joining and/or at the time of any changes on the shop floor. Company rigorously enforces this requirement, maintains the records and accordingly reports to the regulatory agencies. Every worker is trained for the use of fire-fighting equipment. Moreover, Company has extensively trained its welders and received 3rd party certification for the same.

- Occupational Health and Safety

The Company combines adherence to the national industrial safety standards (at par with EU standards) as well as SDF’s corporate standards for workplace health and safety. SDF has demonstrated a notable improvement in safety indices over the past decade, through consistent technical and organizational initiatives. SDF’s corporate-wide initiative include: (i) documentation and analysis of ‘near-miss’ accidents, (ii) a substantial increase in the activities of the ‘safety teams’, (iii) increased participation of the workers’ safety representatives and (iv) establishment of the new post of ‘safety tutor’ for work areas.

SAME Croatia has its own safety policy and a dedicated safety team, supported by a designated safety representative from each functional unit. A detailed safety risk assessment is carried out every year and necessary improvements are made in a time-bound manner. The company has an elaborate safety monitoring system and key performance indicators (KPIs) are regularly reported to SDF.

Adequate safety signage and fire detection and suppression fighting equipment is fitted across the facility in accordance with the potential risks. Personal Protective Equipment (PPE) such as safety shoes, ear muffs, masks, overalls and helmets are provided to all employees based on the risk assessment of each job requirement and its use is strictly enforced.

As a result of a robust safety management, there have been no fatal or major reportable accident in SAME Croatia facility so far and there is a clear downward trend in the number and frequency of accidents or incidents leading to lost man-days over the past years.

IFC’s assessment considered the Company’s operations with regard to resources consumption (water, energy, fuel), efforts to optimize resource inputs, waste minimization and management practices as well as the storage, handling hazardous materials used in the construction and operations of facilities.

The Company’s manufacturing process includes: laser cutting and bending of metal parts, machining, welding, surface treatment comprising pretreatment with zinc phosphate and kataphoresic type of painting with black epoxy paint in an automatic line (KTL), and spray painting. Except for the surface treatment and painting operations, all the operations are primarily dry operations and result in noise and only some solid (packaging, scrap) or hazardous waste (waste oils etc.). The primary source of wastewater is the surface treatment line and painting operation, which results in volatile organic compounds (VOCs) and wastewater generated due to VOC control and treatment system.

- Pollution Prevention and Resource Conservation:

In its quality, environmental, occupational health and safety policy, SDF has articulated its commitment to minimize pollution and reduce wastes and emissions and enhance resource efficiency in line with the SDF group’s corporate policies.

SDF has set objectives for limiting solvent use in the paints in all the facilities across the group. With the introduction of water-based products and modifications to the coating systems, it has reduced solvent consumption by over 30%. SDF is also implementing measures to comply with the European ‘Reach’ regulations on the import and use of chemical substances and is in the process of introducing a computer-based system for the suppliers. In its Treviglio facility, SDF has implemented a waste heat recovery system to use the heat of exhaust emissions from tractors testing beds for preheating of air used in space heating.

At facility level, Company will undertake an energy and water audit to explore the possibilities to reduce the water and energy consumption and thus enhance its resource efficiency. The audit will specifically focus on energy efficiency opportunities in space heating, lighting, compressed air and manufacturing process.

- Water Supply and Effluent:

SAME Croatia sources water from its own well, and further treats with its water treatment units for the paint shop and reverse osmosis system for drinking and KTL potable use. The average water consumption in the plant is approx 2300 m3/month for the process, cooling and domestic requirements. The VOC emissions from the paint booths are collected in water baths and the effluent is pretreated on-site. The total effluent is discharged in public sewerage system for further treatment as per the environmental permit condition. Effluent volume discharge is monitored online and the effluent quality is monitored twice a year to ensure its compliance with environmental permit condition.

- Solid and Hazardous Waste:

SAME Croatia complies with all relevant regulations for the storage, handling and disposal of hazardous materials used in the production process such as paints, solvents, paint sludge and other chemical additives. The notified hazardous wastes are disposed of through licensed waste management contractors, as per the regulatory authorizations. Packaging materials, sheet metal scrap etc. are sold for recycling. Adequate controls during the storage and handling are in place and the types and quantities of solid and hazardous waste thus generated and disposed of are regularly monitored and documented.

Air Quality:

Electricity is the main source of energy for the Company, and is sourced from the grid. The Company has gas fired boilers which produce hot water for space heating and hot water required for painting process. Gas burners are provided in the KTL line for drying purposes. Company will monitor the VOC emissions from the paint drying ovens and shall regularly report to IFC as a part of annual reporting.

As a part of production process, Company fills the charges refrigerant into air conditioning units, which are then fitted in the harvester / combiner cabins. In accordance with regulatory requirements, Company monitors the use of the refrigerant and reports to authorities regularly. Accordingly, it has confirmed that there are no losses due to fugitive emissions of refrigerant during this process.

SAME Croatia monitors stack emissions and ambient air quality as per the regulatory requirements, and will report to IFC through annual monitoring reports, regarding their compliance with national regulations as well as applicable IFC EHS guidelines. In case some parameters exceed the stipulated limits, Company will take appropriate actions to ensure the compliance.

There is direct access to the industrial zone and Company facility from a highway, and hence no impact of vehicular movement on surrounding communities is expected.

While the impacts on the nearby communities due to SAME Croatia’s operations are expected to be minimal, it has developed detailed emergency response plan for its operations. Mock drills are regularly conducted.

On the basis of the above information, and by implementing the Environmental and Social Action Plan it is concluded that the Project has been designed and will be operated in compliance with IFC’s Performance Standards; and the WBG/IFC EHS guidelines.

The company is located in an industrial area, and the nearest community is in Zupanja town. Company recognizes that engagement with nearby communities and other stakeholders is the key for building long-term constructive relationships that are essential for the successful management of Project''s environmental and social impacts.

For this, Company will develop and implement a stakeholder engagement plan, comprising a grievance mechanism and plan for external communication on Project''s environmental and social impacts for the nearby communities and other stakeholders.

As a part of its community engagement activities, SAME Croatia supports various social activities in the Zupanja town, community and schools in Zupanja. It actively cooperates with the nearby University of Slavonski Brod to host engineering apprentices in the factory.

The Company will disclose this ESRS and the ESAP at the following addresses:
SAME DEUTZ-FAHR ZETELICE d.o.o.
Industrijska 5 HR 32270 Zupanja, Croatia

And on the Company website: http://www.samedeutz-fahr.com

All inquiries and comments may be directed to:
Mr. Mario Scapin
Email: mailto:mario.scapin@sdfgroup.com
Tel: +39 0363 421 811

*ICP - Information Consultation and Participation **BCS - Broad Community Support

	Task Description	Anticipation Completion Date
1	SDF will enhance its vendor evaluation process to include EHS and labor compliance aspects in the evaluation of its supplier base.	30 September 2012
2	SAME Croatia will undertake an energy and water audit across its facilities to explore the possibilities to reduce the water and energy consumption and thus enhance its resource efficiency.	30 September 2012
3.	Company will develop and implement a stakeholder engagement plan, comprising a grievance mechanism and plan for external communication on Project''''s environmental and social impacts for the nearby communities and other stakeholders.	30 September 2012