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

This is a Category B project according to IFC's Environmental and Social Review Procedure. Key environmental and social (“EHS”) issues are Puertas Finas's continuing capacity at a corporate level to manage EHS issues; EHS assessment of the expansion of the Company industrial plants; provision of fair and safe working conditions during operations, including improvement of occupational health and safety; energy efficiency; proper use, treatment and disposal of water; solid and hazardous waste minimization and management; fire safety of the existing and proposed new locations; and management of sustainability issues in the wood supply chain.


Applicable Performance Standards are PS1, PS2 and PS3. PS4 does not apply because there are no health, safety and security issues involving the community. PS5 does not apply because the land for expansion was acquired on a willing-buyer-willing-seller basis. PS6 is not applied in this case because the Company purchases its wood from long-established plantations where there is no risk of conversion of natural and/or critical habitats. PS7 and PS8 do not apply because there are no indigenous peoples or cultural property issues involved in this project.

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: Since the inception of the original project Puertas Finas has been responsive in correcting environmental and social deficiencies identified during supervision and has significantly improved its EHS performance through the supervision period. Puertas Finas is currently in material compliance with the agreed Environmental and Social Action Plan as scheduled. The company is committed to keep in compliance and continually improve its operations. Whilst no full EIA was required by Mexican authorities, Puertas Finas assessed the potential impacts of the plant extension in Oaxaca and took the necessary preventative measures, thus fulfilling Mexican EHS requirements to issue the relevant permits and licenses. The construction and operation of the plant in Oaxaca has incorporated good international practice and was designed to be in compliance with local and IFC’s requirements.



Social and Environmental Management Program: At the existing plant in Ixtapa, Tachagusa (TCHG) the Company developed a management system, consistent with ISO standards, that incorporates EHS good practice in the plant processes, which includes a policy defining the Company’s objectives that guide the project to achieve a sound environmental and social performance. Tachagusa’s management system is in the process of certification under ISO 9001 and Mexico’s Industria Limpia standards. The plant in Oaxaca (PFMM) is going through a similar process, as agreed in the ESAP. The Company has FSC Chain of Custody Certification for wood products that require the FSC seal, such as hardwood for high-end doors and furniture sourced from the US, Canada, and fine tropical wood within Mexico, Central America and Bolivia. Most Tachagusa’s wood for plywood is imported from Chile sourced from sustainably managed forests, and wood for veneers is purchased from certified natural forests managed by communities within a 300 km radius of the plant.



Organizational Capacity: At the Oaxaca plant the Operations Manager is also in charge of coordinating EHS performance, with support from a systems specialist and an OHS officer. Tachagusa has a similar structure and organization. In both plants the General Manager is closely involved in EHS activities and takes direct responsibility for the necessary improvements to secure compliance with EHS requirements of both the Mexican government and IFC.



Training: Both the TCHG and PFMM plants have training programs for new and existing employees. The Company provides periodic training on emergency response, first aid, behavioral safety, and is starting with environmental topics such as management of waste and efficient use of resources. This training, which was initiated at TCHG as prescribed in its management system, is gradually being adopted also at the Oaxaca plant.



Monitoring: The Company has a suitable set of environmental and OHS indicators which are monitored periodically and corrective actions are taken as
needed. Monitoring includes liquid effluents, and septic systems performance, air emissions, use of raw materials, particularly wood, some of which is FSC certified, waste generation, and OHS focusing on workplace hygiene and accident frequency and severity as required by Mexican law. Corrective measures are defined and implemented in a timely manner.



Reporting: The Company has a monthly OHS report that is shared with operational managers and discussed in the Accidents Prevention Internal Committee (CIPA) at both TCHG and PFMM. All accidents that result in lost work days are reported to the Mexican authorities. The company also reports internally on some indicators of their operations such as air emissions, water consumption, energy consumption, effluents and solid wastes generation and disposal.



Emergency Preparedness and Response. The Company has formal mechanisms to respond to potential emergencies. These include regular inspection of the fire safety systems, provision of training for the fire brigade and all employees, and periodic emergency drills and exercises. The new plant will implement an emergency response plan and similar measures as per those at PFMM.



Stakeholder engagement: At the outset, the Company had a close interaction with supplier communities, and supported their value added initiatives, through improved saw mills, and helped in their FSC certification efforts. Given that supply of local wood to Puertas Finas has dwindled in the past few years, the relation with the community has been gradually constrained to purchasing, according to fair trade principles, and less focused on community development. There are no deleterious effects of PFMM and TCHG operation on the neighboring businesses and dwellings. The Company has a mechanism to attend any complaint that may be received regarding the operation of the plant.

The Company currently has 1263 employees. There are 818 permanent staff at PFMM of which 588 are plant workers; 301 in TCHG (253 workers), and about 140 in another three plants belonging to Puertas Finas. Women are approximately 30% of the workforce.



Human Resource Policy and Management: Puertas Finas has human resource policies and procedures that are communicated to all employees. The approach to human resources (HR) is in compliance with Mexican regulations and aspects covered in the HR policies include description of benefits, hours of work, conditions of employment, promotion procedures and disciplinary procedures.



There is an open door policy to hear about grievances and suggestions in Tachagusa, but no formal employee grievance mechanism. If an employee has a complaint it will be reported to the supervisor, if the problem is with a supervisor this is reported to the respective Manager or the HR Manager in that unit. HR provides feedback to the complainant, if known, and keeps a record of both complaints and responses. The Oaxaca Plant is developing a similarly formal internal grievance mechanism for the employees consistent with IFC’s Performance Standard 2, which will be communicated to all personnel and applied throughout the Company.



Terms of Employment and Workers Organizations: Terms of employment are communicated to employees during inception. Worker salaries are well above (2.5 times more) the minimum national wage and administrative personnel earns in average 25% above of other employees in similar positions in the area. Employees are entitled to social security and other benefits according to local legal requirements.



Non-Discrimination, equal opportunities and protection of the workforce: Puertas Finas operates under a policy of non-discrimination and equal opportunities. 90% of the employees come from nearby towns, 8% from other areas in the country, and 2% are foreign citizens. The Company encourages internal promotion and advancement, which are done based on skills and performance. Working conditions comply with local regulations, no employees under18 years are contracted as required by the local law. No child labor or forced labor is used by the Company or is suspected in the supply chain. The Company allows for employees to unionize as per national law. There is a signed collective bargaining agreement.



Retrenchment: The Company has increased its workforce over the last years. It is expected that the proposed project will provide an additional 100 jobs. Therefore retrenchment is not expected from this project



Occupational Health and Safety: The design and construction of the PFMM extension has taken structural and safety issues into account, in full compliance with the national building codes and an internationally accepted structural, life and fire safety standards. The design includes fire prevention equipment; means of egress; detection and alarm system; compartmentalization; fire suppression a
nd control; emergency response plans; and operation and maintenance as described in the WBG Environmental, Health and Safety General Guidelines.



Both TCHG and PFMM have OHS officials who set accident prevention and industrial hygiene programs, which are implemented through the operational areas. There are periodic workplace dust, fumes and noise monitoring, ergonomic assessments, and electrical safety assessment. Issues highlighted in the monitoring results have been addressed. The Company is working on fume control from the dyeing and varnishing sections at PFMM, which has not yet fully resolved. The attached Environmental and Social Action Plan (ESAP) includes an item in this respect.



The Company undertook a thorough analysis of occupational accidents according to a methodology suggested by IFC staff. This approach allowed the Company to identify root causes of accidents and actions to address them, including physical improvements, personal protective equipment and training. OHS statistics in the latest Annual Monitoring Report show improved values from previous years, and below Mexico’s manufacturing benchmarks, but higher than international benchmarks for manufacturing activities. The company continues making efforts to improve their OHS performance. During supervision specialist recommended regular OHS workplace inspections and establishing 5-minute OHS talks at the beginning each shift, which the company is currently implementing as per the attached ESAP. All workers are subject to an admission and periodic medical examinations.



The Company provides PPE and training to the employees and will develop and implement a formal OHS management program in order to comply with local law and IFC requirements (as per the ESAP), including activities aimed at raising awareness on safe operation procedures and the use of personal protective equipment.



In both PFMM and TCHG water is supplied by wells, within the properties’ premises, which is treated to ensure drinking quality throughout the plants.



In compliance with PS2, during construction of the new facilities, Puertas Finas will include OHS requirements in the construction contracts.

Pollution Prevention: The activities currently undertaken by Puertas Finas and by the proposed expansion have a low external emission potential and in each unit there is pollution prevention equipment compliant with local requirements and WBG EHS Guidelines. To minimize exposure to workers and make use of useful material, wood cuttings are recycled within the plant, while shavings and dust are collected through an extractor system and the recovered material reused as biofuel in the boilers, which operate within the Mexican norm, to produce steam.



Resource Conservation and Energy Efficiency: Originally 80 % of Puertas Finas’s wood used as raw material was sourced in Mexico, mainly from the mountainous forests in Oaxaca. Much of the wood, particularly high quality rolls used for veneer had FSC certification. Currently the figure for domestic wood has come down to 15% whilst the majority is imported from Chile and other countries. The Company has been working during the past three years to improve energy efficiency and the new plant will include energy efficient power and lighting equipment. The Company has also engaged a cleaner production review, under IFC’s advisory services program. The Company will implement a number of recommendations arising from the report including installation of high efficiency lighting, high efficiency motors and variable speed controls, optimization of painting and varnishing and improved extraction of VOCs from the workplace. In addition, the Company will undertake a more detailed energy audit and will undertake an assessment of opportunities for greater use of renewable energy resources, including making greater use of wood waste as a fuel.



Solid Waste Management: Both the PFMM and TCHG plants collect and separate waste according to reuse potential and risk. The Company optimizes the use of raw materials, therefore waste generation is minimized. Wood shavings and cuttings are recovered and used as biofuel and larger pieces reused in the new furniture lines; other re-usable materials such as paper and plastic are also recycled. Hazardous waste generated includes oily rags, used oil and resins, and used PPE. A formal waste management program, which includes the disposal of hazardous wastes through authorized companies, is used in both plants.



Liquid effluents: In TCHG there is no industrial wastewater except for excess water from the log soaking pit, which is discharged to drainage canal; domestic effluents are treated in septic systems built and operated according to international good practice. In PFMM one of the septic tanks, which was not operating properly, was recently closed and the discharge redirected to the municipal sewer to avoid cross-contamination with the Company’s water well. As per the ESAP, the other septic tank at PFMM, is being overhauled to convert it into a properly designed septic system.



GHG Emissions. Annual Electricity consumption in the key operations supported by this
project and the expansion will be around 7.2 million kWh. GHG emissions from electricity consumption at the expanded facilities will be about 3,270 tonnes of CO2 equivalent.

At the outset, when 80% of Puertas Finas wood was supplied by local communities, the Company had a close interaction with tis suppliers, and supported their value added initiatives through improved saw mills, and helped in their FSC certification efforts. Given that supply of local wood to Puertas Finas has dwindled in the past few years, the Company’s relation with the community has become one of supplier-client according to fair trade principles.

Project documentation is available at Puertas Finas de Montealban’s website: http://www.pmontealban.com.mx, and through the following contact:

Josefina de Jesus Lopez Robles
Phone #: 52 9515176938
Email: mailto:josefinarobles@pmontealban.com.mx

Broad Community Support is not applicable for this project

#	Action/Deliverable	Date
1	Complete and implement PFMM’s Management System based on the company’s procedures manual Submission to IFC of PFMM’s Procedures Manual and draft Management System consistent with ISO standards.	Apr-14
2	Revision of VOC reduction systems to fulfill government regulations and IFC’s OHS requirements. Submission to IFC of design for VOC reduction systems to comply with IFC’s OHS requirements	Oct-13
3	Implementation of improvements to PFMM’s VOC reduction systems fulfilling government regulations and IFC’s OHS requirements. Submission to IFC of VOC monitoring results compliant with IFC’s OHS requirements	Apr-14
4	Design of a septic system for the Agglomerated Products Area, conforming to international good practice. Submission to IFC of design for the septic system to comply with IFC’s wastewater requirements	Oct-13
5	Construction and operation of a septic system for the Agglomerated Products Area, conforming to international good practice. Submission to IFC of septic system monitoring results compliant with IFC’s wastewater requirements	Apr-14
6	Completion of an Occupational Health and Safety Program, including actions to raise awareness on safe operation procedures and use of personal protecting equipment Implementation report of the OHS Health and Safety Program, including activities aimed at raising awareness on safe operation procedures and use of PPE, such as safety talks by supervisiors at the start of each shift.	Oct-13