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 IFC's 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

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, guidelines or design criteria as is described in the following sections.

Key environmental and social issues identified during the due diligence include: environmental and social management capacity; compliance with local permits and licenses, including construction and operation permits; initiatives for energy, water and natural resources conservation; solid waste management, reduction and disposal; food safety; life and fire safety design and management; labor and working conditions; and screening procedures during land acquisition for expansion activities.

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.

Environmental and Social Assessment and Management System: BHG designs and operates the hotels in compliance with local requirements. BHG has well defined design criteria standards for new hotels. The design of new hotels considers technical and environmental specifications, for example, seismic conditions, life and fire safety, efficient use of water and energy, and waste water treatment needs. BHG identifies at the starting of each project the local legal requirements and obtains the applicable licenses. When an Environmental Impact Assessment is required by law, BHG commissions the study. Previous to the development of a project BHG obtains the authorization to use of the soil and the construction license. BHG sub-contracts the design, construction and project supervision of the new hotels; currently the Company is implementing a project management tool to follow up on the technical and financial progress of the projects.



Acquisition targets are identified and a detailed due diligence is performed, including legal elements regarding land tenure, and fire safety conditions to ensure appropriate management and assessment of the identified risks. In the operating hotels the General Manager at each hotel ensures the proper operation of the hotel including human resources issues and relations with local authorities. BHG has basic corporate manuals for the operations. BHG will implement an Environmental and Social Management System (ESMS) in accordance with IFC Performance Standard 1 and as spelt out in the ESAP.



Organizational Capacity and Competency: BHG has consolidated a strong technical and financial team that oversights the Company’s operations. Under the CEO, 4 directors coordinate the activities of the Company. Environmental and Social elements are managed by the Operations Director who oversights the design, construction and operation of the hotels. At corporate level a Human Resources Manager coordinates the HR policies and an Engineering Manager coordinates the construction of new hotels. At each hotel the General Manager is responsible for the day to day operations, including maintenance, safety of potable and swimming pool/spa water, food safety practices and ongoing assurance of fire protection routines. BHG relays on an e-training program to reinforce the competency of the employees, the training program has specific modules for reception, and housekeeping. All workers undergo an induction program.



Monitoring and Review: BHG monitors basic environmental and social aspects of the operations such as water and energy consumption, potable water parameters, food safety surveys, fire safety inspections and labor indicators. Such elements are fully aligned with local requirements. The level of information and reporting varies per property and records were not always available for review. The Company will define data monitoring and reporting requirements consistent with the objectives of the ESMS at each hotel. During construction
of new hotels detailed reports are prepared monthly and those include safety and environmental elements. BHG, through the implementation of its ESMS, will enhance its monitoring and reporting system to define periodicity of monitoring and collection of data on the relevant parameters.



Emergency Preparedness and Response: BHG provides basic training on emergency response to its employees. Emergency response plans are coordinated at hotel level, and external contractors perform inspections for extinguishers and fire detection and suppression equipment according to the maintenance plan. In large hotels an in-house safety inspector is in charge of assessing safety conditions. BHG performs and documents annual fire drills and fire safety inspections as required by local law; BHG will continue to maintain and test periodically its emergency response plans for all hotels and will document the measures implemented. BHG will perform a detailed review of the emergency preparedness and response activities, resources and responsibilities at each property; as identified, corrective measures will be implemented.



Land Acquisition: BHG acquires land through commercial transactions directly with the land owners on a willing buyer-willing seller basis. This is the same case for hotel acquisitions. Land and hotels acquired by BHG up to now has been in urban settings with no associated economic or physical displacement. Involuntary resettlement is not expected from the project.

Working Conditions and Management of Worker Relationship: BHG has well defined corporate Human Resources (HR) manuals and an ethics code (Código de Conduta da BHG S.A) that apply to all operations. Such manuals are implemented at each hotel by HR coordinators and hotel’s General Managers. HR policies are aligned with the requirements of IFC’s Performance Standard 2, Brazilian legislation and with principles of the International Labor Organization. BHG recognizes the right to form or join workers’ organizations and is respectful of collective bargaining; maintains principles of non discrimination and equal opportunity and does not use child or forced labor in its operations. The ethics code has explicit reference to non-discrimination practices. All new employees receive copy of the ethics code and a brochure “Manual de Boas Vindas – BHG” which defines the corporate principles and policies.



Conditions of employment are agreed and communicated to each employee upon taking up employment. Recruitment and advancement are merit based, and the performance evaluation processes are used to assess performance and manage career development of employees. A corporate HR manual guides implementation in all the hotels; such manual defines criteria for the selection, induction, promotion, training, performance assessment and dismissal processes.



BHG has relations with near 16 different worker’s organizations, covering the employees by region/city of operations. In Brazil agreements are negotiated between the hotels of a region and the union, not with individual hotels. Collective agreements are signed and the Company applies the agreed conditions to all employees in the hotels.



Acquisition of hotels in the past has required adjustments in terms of number of employees; negotiations prior to acquisition usually define the terms and conditions for the transition of the workforce. BHG acquires, in some cases, the entire company including buildings and staff responsibilities and in other cases BHG only acquire the buildings; in the second case, processes of retrenchment, if required, are undertaken by the previous owners. BHG prefers to retain the existing employees and avoid retrenchment processes. If BHG becomes responsible for retrenchment activities it will conduct them in a manner which complies with IFC’s Performance Standard 2 requirements including development of retrenchment plans which are based on the principle of non-discrimination, reflecting consultation with employees, their organizations and, where appropriate, the government.



Occupational Health and Safety (OHS): Hotels managed by BHG have in place the required programs under local law such as the occupational medical monitoring program (PCMSO) and the internal committees for accident prevention (CIPA), such programs/studies are usually commissioned externally and third party consultants provide advice to BHG. OHS elements are managed at each hotel and there is no a centralized mec
hanism to manage OHS issues. There is no formal recording of OHS accidents or incidents, though it was reported that accidents are very infrequent. As part of the implementation of the ESMS as described under PS1, BHG will reinforce its OHS practices and will ensure consistency on OHS issues across its hotels. OHS elements during construction are supervised by the assigned Project Manager who ensures that the contracted company complies with legal, technical and administrative requirements.



Workers engaged by Third Parties: Workers engaged in the construction and refurbishing of the hotels are third party employees. BHG selects reputable and experienced construction companies with positive track records on the management of its employees and occupational health and safety aspects (as required by Brazilian law). BHG includes in the contractual agreements with the construction companies clauses to manage labor, environmental, and occupational health and safety issues in a professional manner compliant with local law and in particular with OHS standards aligned with Brazilian requirements; BHG will review and confirm that all construction/refurbishing contracts have such clauses. BHG uses external supervision companies to follow up the construction process and the monthly reports generated cover OHS eventualities as well as key environmental concerns.

Resource Efficiency: BHG has incorporated resource efficiency measures in the new hotels and those under renovation. Such measures include installation of double flushing systems in the toilets, high efficiency faucets, low flow showers, LED lighting throughout the hotels and movement sensors. Variable Refrigerant Volume (VRV) air conditioning units are used in most of the hotels; such units provide energy efficiency as well as flexibility on the installation, optimizing use of space. In large hotels with elevated electricity consumption the Company is working in the modernization of its boilers and refrigeration systems, using an external Energy Service Company (ESCO) to update the systems. BHG controls the use of electricity and water in its operations; as part of the implementation of the ESMS, BGH will review and benchmark the use of utilities to identify and implement measures to optimize the use of resources in its operations. Annual greenhouse gas emissions of the project are estimated at 5300 tons CO2-equivalent during operation; mainly from natural gas and electricity purchase.



Pollution Prevention: Operating hotels are mostly located in urban areas, where sewage system is available and effluents are discharged to the municipality’s sewage for treatment. In developments were the municipality does not have a sewage treatment facility, and aligned with Brazilian requirements, BHG will include in the design a wastewater treatment system for the effluents, such system will be in compliance with the WB General EHS Guidelines.



Overall the units for heating water and backup generators are small and below the size threshold above which IFC requires emission monitoring.



BHG contracts the collection and disposal of waste with the municipality and authorized companies to ensure disposal of material according to local legislation. BHG will implement a comprehensive solid waste management program applicable to all the hotels. The program will focus on reduction of waste generated and will aim to segregate wastes, reuse and recycle the generated waste. Local context and market for the products will be considered in the strategy. BHG is committed to use refrigerants with zero ozone depletion potential and modest global warming potential.



During construction of new hotels solid waste will be collected and disposed of in accordance with local requirements. Currently project management at construction includes the monitoring of significant environmental events; as part of the implementation of the ESMS, BHG will ensure that management of debris and materials at construction sites is adequate.

Existing hotels are located in touristic or industrial areas and there is limited impact to surrounding communities. During refurbishing processes BHG limits the construction time to working hours to minimize impacts to hotel guests and communities.



BHG has retained professional advice to design the life and fire safety (L&FS) systems of the new hotels to be in compliance with US National Fire Protection Association (NFPA) Life Safety Code requirements; BHG will obtain a formal certification, by suitably qualified professional, acceptable to IFC, that the prototype design for Greenfield hotels meets the requirements of IFC’s L&FS guidelines; once the first hotel is completed after IFC’s participation, the selected professional will also undertake a review of L&FS systems to certify that construction has been carried out in accordance with the accepted design. For subsequent projects a qualified professional should confirm that the L&FS system was installed as designed and complies with the Life and Fire Safety requirements of the WBG General EHS Guideline.. The proposed design of the prototype hotel includes an automatic sprinkler system throughout the hotel, supplied by a reservoir water tank and a fire pump; systems for fire protection, detection and suppression, hose flow sensors, manual pull stations, central alarm system, compartmentalization and emergency exits protected by 60 to 90 Minute Fire-Rated Doors among other systems. BHG has confirmed that it will apply the same specifications in all new hotels. Hotels scheduled for renovation will be designed, constructed and operated in full compliance with the Life and fire Safety requirements of the WBG General EHS Guideline. BHG will reinforce its emergency response plans and procedures. New hotels will have functional fire protection systems and periodic fire drills will be performed and documented.



New buildings will be designed to be consistent with the principles of universal access, including ramps for access. Seismic and structural elements are considered in the design of the hotels.



BHG usually receives city water and as needed treatment is applied and regular testing is undertaken to provide ongoing assurance of water quality. BHG ensures integrity of the hot water systems, wet areas, and pool areas by regularly testing, implementing sanitation practices and by providing permanent maintenance to equipments. BHG will maintain domestic hot water at sufficiently high temperature to prevent growth of legionella bacteria, and will test to confirm the effectiveness of these treatments.

Food safety programs are in place to cover the food and beverage service at the hotels (along the lines of the HACCP: Hazard analysis and critical control points program), BHG will maintain high food safety inspections and monitoring records.

BHG hotels are located in commercial and industrial areas. Previous to construction, BHG communicates with the relevant local and national authorities regarding local environmental and social permits. The Company is not required and does not disclose publicly information regarding the new constructions and up to date local community engagement has not been required. However, BHG indicates in its website when a new hotel is planned or will be opening. In the operating hotels local managers communicate with local authorities and solve inquiries from the local community if needed. This ESRS will be locally disclosed.

Documents will be available for public consultation at:
Avenida Atlântica, 3716  - Copacabana 22070 001 – Rio de Janeiro – RJ; and at
Avenida Aquarela do Brasil, 75  - São Conrado – 22610 010 – Rio de Janeiro – RJ

To contact the project company, or request additional information about the project please write to:

Roberta de Moraes Guerra Saunders
Engineering Manager
E-mail: mailto:rsaunders@bhg.net
Phone:  +55 21 3545 5435
Address: Avenida Atlântica, 3716  - Copacabana 22070 001 – Rio de Janeiro – RJ

Broad Community Support is not applicable for this project

Task Title/Description	Anticipated Completion Date
Plan, develop and implement an integrated Environmental and Social Management System (ESMS): BHG will institutionalize operational procedures, practices, management programs and/or action plans to address environmental, labor, occupational health and safety (OH&S), and community-related risks and impacts. The ESMS should cover construction of new hotels, acquisitions, and operation of the hotels. The ESMS will include but not be limited to (i) establishment of an overarching E&S policy; (ii) identification of risks and impacts; (iii) management programs/actions plans to mitigate and address the identified risks and impacts; (iv) practices to reinforce emergency procedures; and (v) procedures for evaluation and monitoring.	June 2014
Review Emergency Preparedness and Response Planning, Procedures and Training: BHG will perform a detailed review of the emergency preparedness and response activities, resources and responsibilities at each property; as identified, corrective measures will be implemented.	December 2013
Develop and Implement a Corporate Waste Management Program: BHG will implement a comprehensive solid waste management program (policy and procedures) applicable to all the hotels. The program will focus on reduction of waste generated and will aim to segregate wastes, reuse and recycle the generated waste. Local context and market for the products will be considered in the strategy.	December 2013
Certification of Life and Fire Safety Systems Construction: A suitably qualified professional will undertake a review of L&FS systems to certify that construction has been carried out in accordance with the accepted design for the first Greenfield hotel completed.	Completion of construction. (First hotel)