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
PS 6 – Biodiversity Conservation and Sustainable Management of Living Natural Resources

This is a category B project in accordance with IFC’s Policy on Environment and Social (E&S) Sustainability. Based on information reviewed by IFC, this investment will have limited adverse E&S impacts that are few in number, site-specific, and largely reversible and readily addressed through mitigation measures, as outlined in the Environmental and Social Action Plan (ESAP) attached to this ESRS. The key E&S issues include: (i) Agrotec’s capacity to provide systematic and consistent management of E&S issues across its operations; (ii) compliance with local permits and licenses for operation, transportation and distribution of products and services; (iii) handling, storage, distribution and transportation of hazardous materials, (iv) compliance of the portfolio of products with WHO hazards class (e.g. exclusion of Ia and Ib products) and FAO’s International Code of conduct on the distribution and use of Pesticides; (v) Pest control management strategy and professional guidance to the clients in the use of the products distributed; (vi) labor and working conditions, including occupational health and safety; and (vii) Agrotec’s responsible sourcing policy and operational strategy to preclude business with clients operating without environmental licenses, principally in the Chaco region of Paraguay.

Issues related to PS5: Land Acquisition and Involuntary Resettlement, , PS7: Indigenous Peoples, and PS8: Cultural Heritage were not identified during appraisal as Agrotec’s distribution centers are located in industrial zones or rural centers; and have all received the approval of the Paraguayan authorities.

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

Agrotec has implemented some of the elements of an Environmental and Social Management System (ESMS) such as: identification of risks and impacts, organizational capacity and competency, and emergency preparedness and response. Agrotec shall upgrade its existing ESMS to achieve parity with all the elements of PS1 requirements. To demonstrate compliance of the ESMS with the applicable requirements of PS1, Agrotec will provide to IFC its upgraded Procedures Manual for: Policy, Management programs; Stakeholder engagement, Monitoring and review, and Community grievance mechanism. Agrotec shall inform IFC when the Integrated EHS Management System is in compliance with PS1 requirements, evidencing that is operational. This will be verified by IFC through site supervision visits.



Policy

Agrotec’s E&S policy statement shall be restructured to clearly communicate Agrotec’s E&S policies to management, staff, clients, contractors and other stakeholders, list environmental and social issues to be addressed, minimize the operational risks associated with labor, working conditions, occupational health and safety, community engagement, spills of agrochemicals to the environment, etc.



Identification of Risks and Impacts

Agrotec has identified the main social and environmental impacts of its operations, and addresses the issues in full compliance with Paraguayan law. The company presented to the local authorities the Relatorio de Impacto Ambiental (EIA) and the Environmental Control Plans (Plan de Control Ambiental) for all the facilities and activities and obtained the respective licenses, such licenses are renewed periodically as required by local law. The Environmental Control Plans identify the main risks and impacts of the distribution centers and the transportation of products; the plans describe the proposed mitigation and control measures. The availability of the environmental control plans have been disclosed locally through newspapers in compliance with local regulations.



Products distributed by Agrotec are approved by local authorities (e.g. SENAVE - Servicio Nacional de Calidad y Sanidad Vegetal y de Semillas). Agrotec has a department dedicated to process and obtain the local registration for all the products the company distributes. In order to acquire the authorizations, Agrotec submits toxicological studies by approved laboratories, physicochemical analysis and other required assessments. In addition, the company achieved full compliance with the United Nations’ Food and Agriculture Organization’s (FAO’s) International Code of Conduct on the Distribution and Use of Pesticides.



Management Program

Agrotec has developed basic environmental and human resources manuals and policies, for example manuals guiding on the safe transportation of materials, use of personal protective equipment, and fire prevention. However documented procedures to operationalize policies at the
locations where the company operates, offset all negative impacts identified in the Environmental Control Plans, and improve E&S performance are necessary and will be developed and implemented by Agrotec. Also, an annual improvement plan will be developed to review and improve procedures based on Action Plans, monitoring (performance indicators and process indicators with targets), internal feedback, and senior management review of progress on action plans and appropriate adjustments to the ESMS.



Organizational Capacity and Competency

Agrotec has appointed a qualified Environmental Engineer to handle the environmental and occupational health elements of the company. There is a Human Resources Manager who coordinates the HR operations. Environmental and Social responsibilities are shared with the local managers of each distribution center, this model has proven to be effective for the company and there is evidence of empowerment and responsiveness towards environmental and social issues at each distribution center and throughout the company.



Emergency Preparedness and Response

Agrotec has trained its employees and contracted drivers to prevent and react in case of accidental spills. All the distribution centers have emergency contact numbers available and elements to control spills such as sand and containment tanks. The company performs periodic drills covering fire, evacuation, management of hazardous materials among other topics. Agrotec has in place emergency response plans for all its facilities. Contracted drivers are trained on management of emergencies; the documentation on the materials being transported is provided and a kit for emergencies with protective personal equipment is placed in all vehicles. Protection to clients is provided through technical assistance, adequate labeling of the products, availability of MSDS, and additional written instruction for the application of controlled materials. Agrotec has implemented controls to require proper transportation and response in case of spills, such procedures and training have been reinforced and targeted to the specific circumstances of Agrotec.



Stakeholder Engagement

Agrotec’s operations involve rural as well as urban areas where storage of inputs and offices are located. The stakeholder engagement procedure at Agrotec will involve mapping of stakeholders, communicating and informing them of risks, mitigation and monitoring efforts, and keeping a robust and continuous grievance mechanism throughout the life of the project.



Community Grievance Mechanism

Agrotec has established a primary community grievance mechanism which is communicated via electronic bulletins. As set forth in the ESAP, Agrotec will formalize the grievance mechanism, and will develop and implement a grievance documentation system for logging grievances and their follow-up. Agrotec will demonstrate to IFC that there has been proactive dissemination of the procedure to employees and stakeholders,
including making the grievance mechanism easily visible and retrievable in Agrotec’s website.



Monitoring and Review

Agrotec has identified the need of monitoring programs in the Environmental Control Plans and does monitor the environmental impacts and risks of the operations. An E&S monitoring system has been developed and basic indicators have been selected for which information is collected periodically and provides input to reporting systems such as the Annual Monitoring Report submitted to IFC. The Company has not established comprehensive management system procedures for internal monitoring and reporting to higher management staff E&S impacts of its operations.

Human Resources (HR) Policy

Agrotec has a strong focus on the development of its employees. Customer service (including technical assistance) is one of the core principles of the company; therefore, there is a significant effort to guarantee that the employees are qualified, retained and well compensated. Agrotec has adopted a Human Resources Policy that has a number of management procedures available for administrative and human resources affairs that ensure full respect of the Paraguay regulatory labor requirements and related international law. The policy and implemented procedures are in line with all PS2 requirements. The HR policy covers all relevant issues in relation to protecting worker’s rights and to providing improved working conditions, as well as good practice in HR management (non-discrimination, no child labor, no forced labor, freedom of association, grievance mechanism, and matters of OHS) in a manual made available to employees. The policy outlines rights and responsibilities of the employees and those of Agrotec. Agrotec has generated a series of memorandums where HR decisions, benefits and rules are presented and shared with the employees.



Working Conditions and Terms of Employment

Agrotec has two types of contracts with its employees (i) services contracts and (ii) direct contracts. Compensation and benefits differ between the contracts: services contracts are used for the management team and most of the sale representatives. Direct contracts are usually for operational staff and entitle contribution to the Paraguayan Social Security in addition to Agrotec’s benefits. Employees under services contracts are responsible for their health plan, which is in compliance with local legislation.



Conditions of employment, including compensation are defined in the contracts with each employee. The minimum salary paid in Agrotec is above the legal minimum salary in Paraguay. Working conditions comply with local regulations, no employees under18 years are contracted as required by local Law. There is no evidence of child labor or forced labor in Agrotec’s clients or suppliers.



Workers’ Organizations

The employees of Agrotec do not belong to workers’ organizations or unions, and there has not been such request among the employees. The management team of Agrotec confirmed that they would not prevent employees to organize or participate in workers’ organizations. There have never been labor complaints against Agrotec.



Retrenchment

No retrenchment is anticipated, moreover, Agrotec estimates that the workforce will grow slightly, mainly on the administrative side.



Non-Discrimination and Equal Opportunity:

Agrotec applies the principles of Non-Discrimination and Equal Opportunity. There is no evidence of discrimination based on personal characteristics or gender. Fair treatment is observed in the company, including processes of hiring, promotion, and termination of employment. Agrotec has an annual performance asses
sment with 360 degree evaluations, the system is considered fair and positive among the employees.



Grievance Mechanism

Human resources procedures include an employee grievance mechanism that allows for workers to express their concerns and also to provide suggestions for improvement with line management staff. Due to the relative small size of the teams, communication is quite direct and employees can raise concerns directly to Human Resources or to the Management staff.



Workers Engaged by Third Parties

Agrotec’s day to day activities are mostly conducted by direct employees; however transportation services, as well as specialized tasks such as maintenance or construction works are sub-contracted. Agrotec has in place provisions for contractors, including safety measures, access to facilities and legal compliance with labor law and PS2 requirements.



Occupational Health and Safety (OHS)

Agrotec conducts workplace/job hazard analysis which is used to prioritize mitigation actions. Subsequently employee training focuses on the demands and hazards associated with specific workplace and understanding of the hazard analysis, as well as orientation to employee responsibilities with regard to wearing personal protective equipment (PPE) and reporting accidents and near misses. Relevant occupational health and safety principles are effectively documented in the comprehensive OHS manual and ensure appropriate level of protection to all employees.



OHS elements in Agrotec have been oriented to the safe handling, storage and transportation of the products; Agrotec has documented safety procedures including procedures for emergency response during storage and transportation; investigation of accidents; and site inspections among others. The distribution centers are well designed with functional eye and body washers, containment kits, and natural and forced ventilation systems. The seeds processing plant, encompasses proper housekeeping and OHS controls. The company presented evidence of training on elements such as emergency response, confined spaces, and safe transportation. The company has reinforced its OHS procedures, in particular those related with work permits, transportation of materials, confined spaces and recordkeeping.



Training

Employees receive proper training based on the assigned tasks; the majority of the employees have received training on handling and transportation of hazardous materials, use of personal protection equipment, and use of extinguishers. Personnel with specific responsibilities in the transportation of materials are further trained and licensed by the local authorities to transport agrochemicals. The company provides trainings on other topics such as Cardiopulmonary Resuscitation (CRP); first aid; and confined spaces

Resource Efficiency

Agrotec operations do not require intense use of resources. The distribution centers use natural illumination and do not require water use other than for sanitary purposes. Therefore no industrial liquid effluents are generated by Agrotec. The use of energy and fuels in the Pedro Juan Caballero seeds plant is limited to the production season that is four to five months per year.



Agrotec’s air emissions are associated with the distribution fleet and vehicles used for sales purposes. The fleet used for distribution of products and diesel is modern, the Company has policies to renew vehicles every four years, to ensure proper conditions, and a preventative maintenance plan is followed. In the Pedro Juan Caballero seeds plant, emissions are limited to the use of agricultural equipment for the cultivation and harvest of the seeds. During the processing of the seeds and storage of grains, dryers are used; the fuels employed are LPG and natural wood, which is sourced from a plantation that is authorized by the local authorities.



Greenhouse Gas Emissions

Greenhouse gas (GHG) emissions of the operations are associated with electricity consumption, the use of wood and LPG for the grain dryers, and fuel for the fleet used to distribute the products and for technical assistance. GHG emissions of the current operations have been estimated at around 22,000 tons of CO2-equivalent, most of which is derived from wood use and fuel for transportation purposes; electricity contribution is minimal, due to its hydroelectric source in Paraguay.



Pesticide Use and Management

Agrotec distributes, among other products, fertilizers and agrochemicals. The company stores and transports the materials according to local and international regulations, aligned with the FAO’s International Code of Conduct on the Distribution and Use of Pesticides. Measures include the existence of MSDS, transportation documents, training, and full compliance with registration and permits required to import and distribute the products. In addition, Agrotec provide technical assistance to its clients on how to apply the products, including the use of PPE and the company has been actively involved in national initiatives for the safe management of pesticides.



Distribution of agrochemicals represents approximately a quarter of the business of Agrotec. Almost 80% of agrochemicals sales of Agrotec correspond to products containing active ingredients that are unlikely to present acute hazard in normal use (Class U) or are slightly hazardous (Class III); based on the classification of active pesticide ingredients from the World Health Organization (WHO). The company only distributes products authorized by the local authorities (e.g. SENAVE) and follows the local requirements for its distribution. Agrotec has been following national recommendations and has been proactive in offering pesticides containing less hazardous active ingredients. Agrotec has phased out WHO Cl
ass Ia and Ib products and is committed to avoid the distribution of any products containing Class Ia or Ib ingredients. Agrotec has reviewed the technical and economic feasibility to replace Category II products with less hazardous materials; considering alternatives such as cultural practices, biological control, and as last resort chemical means, in few cases replacement has been feasible and the company is also distributing pre-treated seeds to minimize exposure of clients. Agrotec has provided proper training to its clients on topics such as handling and storage of products, management of equipment and chemical applications, and disposal of residuals and containers.



Agrotec is aware of the benefits of implementing Integrated Pest Management (IPM) approaches, and has in its portfolio some biological products as key components in an IPM strategy. Agrotec will continue to promote IPM among its clients.



Technical services are provided by qualified and certified professionals, Agrotec has in place controls to ensure quality in the service and retention of its clients, which includes a proper guidance in the use and application of the products. In addition, clients usually have their own team of agronomists to advise them in the use of agricultural inputs. There is no evidence that Agrotec is overselling chemical inputs by suggesting additional application.



Solid Waste Management

Waste generated from the operations is basically domestic waste. Reuse of bags and cardboard is done by the company. Agrotec has provided training and guidance to its client regarding the proper management procedures for container disposal. Regarding agrochemicals, Agrotec recommends and promotes the triple wash and puncture of containers to reduce the risk of these being re-used by the clients or their workers.

Agrotec exercises proper care to minimize the exposure of its clients and communities to the products the company distribute. Storage of products is minimized by coordinating the purchase with the direct delivery to clients. The 11 distribution centers have controls such as independent drainages with collection tanks, eye and body washes, and fire suppression equipment.



Hazardous Materials Management and Safety

As described previously, warehouses and the fleet have the infrastructure required to prevent potential safety incidents. Drivers have been trained on emergency response and all vehicles transporting agrochemicals have information regarding the products being transported. Transport procedures are aligned with FAO’s International Code of Conduct on the distribution and Use of Pesticides.



Security Personnel

Agrotec contracts security guards for the distribution centers and the seeds plant. The guards are contracted through a recognized security company and are armed. The security company has ethics manuals, and trains the employees in appropriate use of firearms, and follows up to satisfy itself that these procedures are adopted. There have not been complaints or allegations of improper behavior by security personnel.

The project does not include expansion of the cultivated area and under no circumstance will the company clear natural forest. However, support to farming in Paraguay brings a risk of support to illegal farming, and associated loss of biodiversity, in the Chaco region of the country. In addition, in some cases Agrotec receives payment from its customers in the form of grains which it then trades, so in these terms PS6 places supply chain responsibilities upon Agrotec which are described below.



Agrotec together with IFC has developed a definition of an “Eligible Farmer”, a prospective customer with which Agrotec can develop or continue business. As set forth in the ESAP and as part of its ESMS, Agrotec will develop and implement procedures to confirm that the farming that it supports is not on illegally cleared land in Chaco, by documenting that Eligible Farmers’ provide confirmation of land title registration at the Paraguay Public Property Registry, commercial and financial references, and a current environmental license and/or de facto approval based on elapsed time from the date of the license request, among other conditions. These documents will show that if an Eligible Farmer operates in Chaco the operation is legal. None of the Eligible Farmers currently engaged in business activities with Agrotec operates in the Chaco.



In addition, Agrotec shall inform Eligible Farmers with whom the company has contracts for sales of inputs and acquisition of agricultural products at harvest, that Agrotec expects them to comply with the national environmental legislation (no illegal land clearing), will add a clause in the contracts with Eligible Farmers to prohibit the use of agricultural inputs sold by the Company for primary agricultural production in the Chaco Region on farms where an environmental license has not been obtained, and will suspend business relationships with farmers that do not meet this requirement.



Annual reporting from Agrotec to IFC will include the status of the environmental licenses of Eligible Farmers, and documentary evidence of the environmental licenses for farms in the Chaco Region in Paraguay that are customers of Agrotec.

Agrotec’s community relations are focused on training of the farmers and providing proper assistance. The company has agreements with local universities to facilitate practical training of the students. In addition the company has done some voluntary work with participation of the employees to help communities close to the distribution centers.
Agrotec discloses the Environmental Control Plans as per required by local law and the previous Environmental and Social Review Summary produced for the previous project with IFC (#28717) was disclosed locally and in the in the Paraguayan trade press, as well as at IFC’s disclosure portal.

To contact the project company, please write to:

VANDERLEI GONCALVES
Km. 4 - Supercarretera a Hernandarias
Ciudad del Este, Alto Paraná – Paraguay
Telefono: + 595 61 571900
mailto:vanderlei.goncalves@agrihold.com
http://www.agrotec.com.py

The ESRS and ESAP documentation in English and Spanish is also publicly available locally at the following locations:
AGROTEC S.A. CASA MATRIZ
Agrotec SA - Casa Matriz – Ciudad del Este
Km. 4 - Supercarretera a Hernandarias
Ciudad del Este, Alto Paraná – Paraguay
Telefono – 061 571 900

-Agrotec will make adequate public disclosure of this transaction in the Paraguayan business and trade press.

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
1. Agrotec shall upgrade its existing Environmental and Social Management System (ESMS) to achieve compliance with all the elements of PS1 requirements. To demonstrate this compliance, Agrotec will provide to IFC its upgraded Procedures Manual showing: (i) Policy, (ii) Management programs; (iii) Monitoring and review, (iv) Stakeholder engagement, and (v) Community grievance mechanism.	12/31/2014
2. As part of the PS1 compliant ESMS, Agrotec will develop and implement supply chain procedures to support sustainable operational practices. 2a) To reduce the risk of supporting farming of illegally cleared land in the Chaco Region in Paraguay, Agrotec will add a clause in the contracts with Eligible Farmers to prohibit the use of agricultural inputs sold by the Company for primary agricultural production in the Chaco Region on farms where an environmental license has not been obtained.	12/31/2014
2b) Agrotec will ensure that “Eligible Farmers” as defined in the legal documents with IFC have obtained their environmental licenses.	06/30/2015