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

The proposed project is being developed in accordance with national (Poland and Ukraine) regulatory environmental, occupational health and safety (OHS) and social requirements and European Standards, by an experienced Sponsor committed to good E&S practices. The expansion project is based on strengthening vertical integration of farm production from initial crop generation till final animal delivery to slaughtering facilities (internally or externally), with due respect for optimizing EHS performance and animal welfare, following international labor standards, including OHS practices, and the integration of farm waste utilization to generate biogas at all main farms in order to avoid significant pollution. With no indication of impacts related to Performance Standards 5 through 8 and site-specific, limited and readily mitigated environmental and social issues under Performance Standards 1 through 4, this is a Category B project, in accordance with IFC’s Environmental and Social Sustainability Policy.

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.

Social and Environmental Assessment:

The Axzon pig production farms in Western Poland were gradually acquired over the last 19 years as existing low performing (most of them were abandoned for several years, and the land had laid idle, and people were unemployed) soviet era pig production facilities, and, in 2004, Axzon entered the Ukrainian market when they took over the Prykarpattya / Kopanky Pig Production Complex near Kalush city (Ivano-Frankivsk region). As the farms in Poland and Ukraine were acquired, they were reconstructed overtime in order to comply with both local requirements and European Union (EU) animal welfare requirements enforced within the EU from January 1, 2013, and at the same time achieve production efficiency by improving piglet survival and growth rates. All farms are operated as Special Pathogen Free (SPF) farms with sterile herds protected from outside diseases, hereby minimizing the need for disease treatment and medicine usage in the herd. While most of the initial Axzon farms were upgraded older farms, several new farms have been added in Ukraine. The new farms are based on latest construction principles and are designed and established according to modern EU criteria, as a copy of latest farm designs from Denmark, with pesticide, fertilizer, and animal health principles transferred accordingly. This means that not only are the local Polish and Ukrainian standards adhered to, but also the EU criteria as it relate to pesticides, fertilizers, medicine, and principles for animal welfare.



Social and Environmental Management System:

The new greenfield farms are developed after the preparation of local ESIA Studies, while older farms are going through the approval procedures for existing operations which either involve environmental audits or environmental impact assessments as the basis for issuing the new permits. For all farms this means procedures in line with the EU IPPC Directive describing in details how industrial operations have to prevent or control their pollution to stay within sector specific norms. These norms are similar to, but typically more stringent than the IFC Performance Standards requirements.



The Company employs dedicated environmental and health & safety officers in both Poland and Ukraine who, in consultation with the animal production managers and the crop production managers, prepare specific local language (Polish and Ukrainian) instructions covering all operational functions, including related environmental, occupational health & safety procedures and plans. The instructions are illustrated with pictures from the specific operational equipment used at each farm and are posted in relevant sections of the farms as well as given to each employee during their induction training. Most management systems, including procedures are computerized, and are directly copied from modern operations in Denmark. The management systems used encompass animal (health) tracking systems, individual feed n
eeds tracking, and fertilizer / pesticide application management and tracking systems for agricultural operations. These systems are well functioning under the current organization and has been validated during appraisal. Formal Term of References (ToRs) specifying the responsibilities of the Environmental and the Occupational Health and Safety (EHS) officers, including reporting lines needs to be developed to support these systems as the Company continue to expand its operation. This requirement is included in the attached Environmental and Social Action Plan (ESAP).



Land acquisition and planning procedures:

The initial pig production farms in Poland and Ukraine were all bought as partly run down large scale production facilities established in the Soviet era. Axzon acquisition from former private owners has therefore been the best option these owners had for exiting non-profitable / partly closed down operations. Axzon has in the acquisitions taken over fixed assets and knowledge about potential previous employees interested in joining the new productions when restarted.

The current Axzon activities in Poland have around 1150 employees, with approximately 26% women. The Ukrainian operation is in a continuous expansion phase and had by the end of 2012 approximately 710 employees, of these more than 200 are employed in the building and inventory production for the expansions, with a gender distribution with 15% women. Traditionally the crop production and building activity has most male applicants for the jobs, while the pig production tends to have more women applying for the jobs.



Human Resources Policy, working conditions:

Axzon has a highly responsive organization, with specialized managers handling all issues in relation to their areas, including human resources management. Employees have written standardized contracts, with new hire''s selection being based on recommendations from the section managers and approved by the joint management group. Promotions are carried out based on the section manager''s evaluation of past performance, and verified in the management group before execution. The differences in male / female ratios in the different production areas reflect local work traditions and therefore who has been applying for which job types. Non-discrimination and equal opportunity principles are part of the management norm, as well as local regulation, and will be formalized in a new HR policy to be developed, as set forth in the ESAP. The company is open for employees to organize in labor unions, but does at this point not have any major unions present at its locations, while employee representative groups (solely elected by the employees) are having regular meetings with the Board Of Directors. As the company has been in constant expansion, and expect to continue to do so there is no foreseen need for retrenchment, but rather opportunities for good performers to advance in the organization. The organization has an open doors principle, where employees at any level are welcome to bring issues or grievances to any preferred level of management for consideration. The company does not employ staff below the age of 18, except when it is part of mandated educational internships. For progressive skills development the company provide education and training on all levels, including vocational, language and leadership training in both Poland and Ukraine. For business and leadership development professional Danish coaches provide training on a regular basis.



The company is 60-70% self sufficient in crops for feed production with the balance being sourced in the local and well regulated commodity market, therefore typical supply chain risks are not expected.



Occupational health and safety:

The existing Axzon farm are developed from upgrading existing farms with imported or own produced state-of-the-art technology, where changes are needed, hereby reducing heavy lifting and other typical farm related health risks. The farm has effectively adopted and implemented specific safety instructions prepared in
local languages and posted in relevant spots, as well as given directly to employees through training. Despite the strong safety initiatives the statistical data on the accident frequencies for 2012 has been above the expected sector benchmark for well run operations. To get behind the causes for the somewhat high accident frequencies and to support the organization as it expands, the ESAP includes specific action to formalize the responsibilities and prepare clear lines of duties to ensure unsafe actions are continued to be recorded and actions taken to prevent their recurrence and bring down the frequencies.

The pollution prevention measures at the Axzon farms follows the strict principles adhered to at farms within the EU as it relates to resource efficiency.



The pig farms:

The pig farms are operationally based on the principle of SPF (Specific Pathogen Free) herds being protected from incoming diseases by limiting the import of new (genetic material) animals and only allowing new animals to join the herds after prolonged quarantine. This principle also includes a bio-hazard protection zone (often part of the farm''s own land) within which no other commercial animal hold is allowed and is combined with strong bio security rules for human and material entrance on the farms, including requirements for washing and disinfection between entering different units of the farms. In this way, the medicine usage can be kept low, while a good health of the herd is maintained.



Nevertheless, medicine is still needed from time to time and the pig farm therefore has secured medical cabinets, which only qualified veterinarian personnel has access to. Further, only trained personnel are allowed to handle and distribute medicine to the animals. Beside the local veterinarian (a minimum of one per farm), an international veterinarian specialized in pig health issues controls the herds several times a year and advice on animal health issues.



The manure generated by the pigs is pumped from the animal stables to biogas production facilities where available and thereafter on to sealed lagoons (in a few cases concrete holding tanks with top seals to prevent any evaporation)), where it is stored until field application in the spring and autumn. The design of the lagoons, with fixed double bottom liners with leak control and a single floating top liner, as well as the design of the field pumping systems prevent smell during the storage of the manure, and also prevent raw manure from spilling into water courses. Where concrete tanks are used instead of double liner lagoons, it is due to installation of these systems ahead of Axzon''s take over and these concrete tanks were controlled for leaks, and sealed on top, before reintroduction in the production. Where biogas is produced from the manure before storing and land application a carbon source is needed to facilitate the digestion. The used carbon source is primarily corn silage at Axzon’s facilities. The corn silage does introduce extra nitrogen, together with the carbon and while the manure has less smell after biogas production it needs extra land for its application to ensure the correct utilization by the growing crops.



The biogas production facilities at a continuously expanding numbers of Axzon’s farms (currently nearly half a dozen farms have it) are based on utilizing the animal waste from the farms for producing heat and power for the farms and for sale to the grid and domestic heating in nearby villages where feasible. Typical units developed and installed by Axzon has been based on production of 1 MW
electricity and the heat needed for farm heating (flooring under piglets, etc) and hot water in sanitary facilities. Energy produced in 2012 amounted to 56,273 MWh electricity plus 39862 MWh Heat (excludes waste/unused heat). The resulting carbon emission saving is 44,321 tons of CO2 equivalent. The total CO2 emissions from the Axzon operation is 15,233 tons CO2 equivalent, based on the IFC CEET tool:

www1.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/CB_Home/Policies+and+Tools/GHG_Accounting/



The general waste from the facilities (including medical waste, pesticide containers, etc) are sorted and disposed by licensed contractors according to safe principles. The system currently used for disposing of dead animal varies slightly from farm to farm; but is for all farms based on the principle of contractors collecting dead animals for destruction facilities designed to utilize the remains.

Animal welfare is at the core of Axzon''s operation and has been ensured by rebuilding all acquired farms, whether in Poland or Ukraine, to adhere to both local regulations and the new EU animal welfare standards applied from January 1, 2013 throughout EU (also known as the 2013 animal welfare standards). This means that all animals are kept in group housing (in contrast to individual crates), except for sows undergoing insemination and sows in the farrowing section. Weak animals needing treatment and protection are in certain cases kept together in special treatment group housing and in other cases separated for individual care reasons. The EU rules also calls for moveable toys to be available for the animals. Over and above the EU regulations, but in accordance with Danish regulations, the Axzon farms use anesthesia in connection with the castration of male animals.



The crop production:

For the crop production includes the use of modern state-of-the-art production principles where the manure, which is high in nitrogen and phosphate, is used for basic land fertilization in the spring and autumn when the crops are ready to absorb the nutrients, and runoff due to frozen soil can be avoided. The balance of nutrients needed by the crop will be provided by the use of commercial fertilizers. To ensure the crops and soil can handle the nitrogen and phosphor from the manure, nearly 1 ha is used per sow in the production. This balances the crop production, and typically results in around 65-70% of the nitrogen, and all of the phosphor needed by the crops being provided by the manure applications.



The crops need for the pig farms feed are mainly barley/winter barley, wheat/winter wheat and some high protein crops. Other crops, not needed for the pig feed production, might also be used to ensure the appropriate crop rotation to improve the soil quality.



Pesticide management and application is carried out with chemicals approved both locally and by the European Union. The application of both fertilizers and pesticides are controlle
d with the help of computerized management tools, and the application rules including enforcement of non-application zones around open drainage, water channels and rivers to prevent waterway contamination.



General conditions:

The farms do not carry large scale risks. Nevertheless, emergency preparedness and response plan are prepared to be able to respond to emergency situations in a manner appropriate to the operational risks and the need to prevent potential negative consequences for humans and the environment. Axzon will, as part of the ESAP, ensure these plans are readily available in each section of the farm.



The farms are all supplied with power from the national grid (for biogas producing plants the net import/export is often near balance), while most have own water wells established within the farms own land based on hydro-geological acceptance and water permits. The water from the wells are evaluated individually and treated if necessary before use in the animal production. Testing of emission, smell analyses, and test of local rivers and waterways are done on a regular basis, and monitored and reported to local and regional authorities.

The Axzon farms are located in rural areas with low population density, and with substantial safety zones around each pig farm to isolate the herd from bio hazards. These safety zones, to protect the animals from human and other animal interaction, also means that there are no practical risk factors for the public arising from the animal production.



The crop production includes the movement of large scale machines, as well as the application of manure, commercial fertilizers, and pesticides. These operations are taking place in the areas around each farm and on minor roads close to the farms. These roads are generally in areas with low population density, and inhabited by farmer families used to the nature of large scale agricultural machinery. Nevertheless, to ensure the broad safety of these operations, the most modern equipment is used, including mainly pumping of the manure to the fields instead of tractor tanker transportation on the roads, and the operators are trained in the safe operation of this equipment.



Smell discomfort during the manure application is an issue of concern, and the farms are trying to minimize these effects by pumping manure directly to the fields where possible, using modern hose application equipment to give fast soil contact, and limiting the application period in each area. Specific on black soil all distribution of manure is done with injection into the soil, thus eliminating evaporation. While pumping the manure reduces the road transport equipment risks, it carries an inherent environmental risk if the pipes/hoses fail. Therefore, the pumping systems are equipped with automatic stops, should the pressure fall, and guards will be on duty at any river / creek passing during pumping.

With all Axzon''s farms being large scale operations and all being located in low density rural areas, they are, despite their modern efficiency and therefore limited number of employees, an important part of these low population density community, where agribusiness is the main occupation. Axzon has therefore, as part of their Corporate Social Responsibility (CSR) policies, engaged in support for local social activities. These activities varies from farm to farm based on local conditions, but has included support for local schools, kindergartens, cultural centers, social rehabilitation for handicapped children, elderly activities, sports activities. This support is often based on “mutual projects”, where Axzon purchase the needed materials and then Axzon staff, together with local groups, are renewing or renovating village buildings and schools. Also significant economical support has been given to infrastructural improvements in the form of road improvements, establishment of gas distribution main pipes, as well as road and public areas clearing in the wintertime. Axzon is also trying, where possible to engage in local vocational training programs to enable local school graduates to qualify for jobs on the farm. More of Axzon CSR activities are described at their web-portals for which links are given in the "access to documentation" section of this document.

Axzon will make the current ESRS/ESAP review locally available, in Polish, Ukrainian and English language as appropriate, as part of their continued interaction with the local communities. The general disclosure will take place at their internet portals, where they also describe their general approach to Corporate Social Responsibility and Environmental performance:

http://www.axzon.eu/
Subsidiaries:
http://www.poldanor.com.pl/en/strona-glowna
http://www.primefood.com.pl/
http://www.danosha.com.ua/
http://www.sevelslagteri.dk/

Further the documents will be presented in Polish at the Poldanor HQ entrance at the following address:

Ul. Dworcowa 25
77-320 Przechlewo
Poland

and

ul. Młyńska 43 b 77-320 Przechlewo
Poland

And in Ukrainian language at the following address:

Ul lisowa 1
77-330 Kalush
Ivano Frankivsk Oblast
Ukraine

Broad Community Support is not applicable for this project

Axzon (#31990), Environmental and Social Action Plan (ESAP) Version February 12, 2013
	Environmental and Social Issue: Corrective Actions Required	Timetable Milestones/Events
Social and Environmental Assessment and Management Systems
1	Corporate EMS / OHS / HR policies and statements are needed: Axzon has a well functioning and elaborate set of internal policies, procedures and instructions covering EMS / OHS / HR standards. These are however mostly at the country level and Axzon therefore needs to harmonize these for Corporate level application to ensure the continued consistent operation and IFC Performance Standard compliance throughout a growing organization.	Axzon to prepare the full set of corporate Policies and procedures, based on the current country specific documents and consistent with the IFC Performance Standards, for Board discussion and approval by September 2013. The Policies should thereafter be translated into the relevant languages and adopted by the operational country organizations.
2	The Environmental and Social Management Systems (E&SMS) shall ensure a continued operation for all farms consistent with local regulations and IFC''''s performance standards: The current more than 40 farms located in Northwestern Poland and Western Ukraine were acquired mainly by the take over and revitalizing of existing farm structures, and later by greenfield developments as a supplement. The acquired farms have all been upgraded to fully comply with local regulation and EU IPPC standards for pig production, while all Greenfield farms have been build to these standards from day one of operation. Both in Poland and Ukraine, the Company employs environmental officers who, in consultation with the animal production manager prepares specific (local language) instructions covering operational functions as these functions are identified. Corporate ToRs to specify the responsibilities of these officers, including reporting lines needs to be coordinated.	Prepare and deliver ToR for the environmental officers specifying duties, and reporting lines for event types by September 2013. A similar set of ToRs are needed for the organizations environmental and social performance management person(s) responsible for direct reporting to the management and the Board of the company to ensure all important performance and compliance related information is passed in a duly way.
3	The Occupational Health and Safety Management Systems (OH&SMS) which is under the supervision of the animal production manager, the crop production manager, and the environmental officers shall ensure a continued operational consistent with local regulations and IFC''''s performance standards: While Azxon has specific safety instructions for operational functions prepared in local languages (Polish and Ukrainian) and posted in relevant spots, as well as given directly to employees, it is not clear who has corporate and country specific responsibility of ensuring all instructions are prepared and implemented. As the organization expands, there is an increased need to formalize the responsibilities and prepare clear lines of duties to ensure extensive OHS training and to record unsafe actions and ensure corrective measures are taken to prevent their recurrence.	Prepare and deliver ToR for all members of the safety organization specifying duties, and reporting lines for event types by September 2013.
Labor & working conditions and project affected stakeholders
4	A Human Resource (HR) policy and principle statement ensuring adherence to local regulations as well as ILO core labor standards as defined in Performance Standard 2 is needed: Axzon''''s management team will develop Human Resource (HR) policies and principles ensuring continued adherence to local regulations as well as ILO core labor standards as defined in IFC''''s PS2.	The current local documentation needs to be coordinated at corporate level by December 2013.
5	Community / affected stakeholder grievance mechanism: Axzon will ensure its comprehensive online presentations include a link for affected stakeholders to file potential grievances with the local companies. The link should include a clear indication of the expected response time and each company should hold a record of filed complaints / grievances and the responses / actions taken. This is in line with good CSR practice and IFC''''s PS2.	The current local documentation needs to be coordinated at corporate level by September 2013.
Pollution prevention and abatement
6	Modern state-of-the-art production principles are used in the crop production; this includes pesticide and fertilizer management and application in accordance with EU principles and local regulations, including the avoidance of WHO 1a and 1b substances: Axzon crop production managers will ensure that only EU approved pesticides and fertilizers are used and in accordance with the relevant application guidelines, including specific local legislation. This includes enforcement of relevant non-application zones around drainage and water channels to prevent waterway contamination in accordance with local rules.	Pesticide and fertilizer usage in accordance with these principles to be reported in the annual monitoring reports.
7	Medicine usage and disposal of un-used medicine: All the animal farms have secured medical cabinets, which only qualified personnel (veterinarian) has access to, and only trained personnel are allowed to handle and distribute medicine. Beside the local veterinarian, an international veterinarian also controls the herd several times a year and advice on animal health issues.	Medicine usage in accordance with these principles to be reported in the annual monitoring reports.
8	Liquid effluent control in case of manure spills: All animal farms have by the end of 2012 been equipped with modern sealed manure lagoons or tanks for manure holding. The manure is pumped from the animal stables to biogas production facilities (where available), and from there to the manure holding facilities, where it is stored until field application according to crop needs in the period spring to autumn. The design of the lagoons and the advanced field pumping systems shall prevent raw manure from spilling into water courses.	To be included in all future design specifications.
9	Manure application control. Fertilizer balancing: The manure is high in ammonia and phosphor and needs to be utilized as fertilizer on crop growing farmland. For some farms this means the need for agreement with local farmers for the use of the manure to substitute commercial ammonia and phosphor fertilizer on their fields, while it for other farms will be based on having an animal hold balanced with the farm’s crop growing area. Pig farms with biogas units further need to add a carbon source to the manure to facilitate the digestion and methane formation. These carbon sources will increase the nitrogen content in the resulting manure if based on crop sources like ensilage. The application of manure needs to be planned carefully and specific for each farms final manure composition to ensure 1) no application in frost periods to avoid runoff problems, 2) no application within 10-50 meters of water courses (depending on local rules / biological sensitivities), 3) manure application limited to the actual needs of the crops grown on the application fields, and 4) calculation of the fertilizer deficit after the manure application to determine the need for commercial fertilizer add up.	Axzon has these systems well organized in all current farms and will need to expand these systems as the expansions move forward. To achieve balance the manure application normally have to be spread according to a land need equivalent to slightly below 1 ha per sow in the fully integrated pig production facility. Annual reporting on all new projects to ensure balance between animal hold, manure production / composition, and farmed crop land.
10	Emergency preparedness and response in case of any accident: All farms should have an emergency preparedness and response plan in place to be able to respond to emergency situations in a manner appropriate to the operational risks and the need to prevent their potential negative consequences for humans and the environment. The plan including contact information should be readily available in each section of the farm.	Prepare and disclose formalized emergency preparedness and response plan by December 2013 for existing farms and within 6 months of operation start for newly acquired farms. For any new Greenfield operation the plan should be available at animal production start.
11	Waste disposal and management: Waste from the operations are sorted and disposed according to safe principles. The dead animal disposal systems used are based on the collection by rendering companies, with no burials of animal carcasses carried out. For new farms it is needed to either have similar destruction options available or establish an internal destruction system (ref. incinerator). Air emissions from the incinerator will have to comply with WBG’s guidelines.	For all new facilities prepare and implement an animal destruction system as part of the production preparation, and include a description in the annual monitoring reports.