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

This proposed investment is expected to have limited environmental and social impacts which are expected to be site-specific and none is expected to be significant. Those impacts can be avoided or mitigated by adhering to recognized performance standards, procedures, guidelines and design criteria as described in the following sections. Thus, this is a Category B project in accordance with IFC’s Environmental and Social Sustainability Policy. This categorization is in accordance with other similar type of projects within the sector. The project is designed to avoid, minimize and manage E&S risks and impacts of the Company’s operations in compliance with applicable IFC’s Performance Standards and World Bank Group (WBG) General and sector-specific (Dairy Processing) Environmental, Health and Safety (EHS) Guidelines.

Based on the findings of the appraisal visit, key E&S issues related to this project encompass the following: the Company’s EHS corporate management system, procedures and technical capacity for its effective implementation and continuous monitoring/reporting; labor and working conditions, management of contractors and suppliers; facility design and efficiency of raw material, water and energy use/efficiency in the manufacturing process, pollution control, solid waste management and disposal, and fire safety.

The facility is already established on 22ha of former agricultural land that was officially re-designated for industrial use in 2011. The land is owned by the company and there is no need for additional land for implementation of the Project: therefore PS5 is not triggered The land for the production facility is located on agricultural land where biodiversity values or ecosystem services will not be impacted. As well, ASDI presently imports milk powder from EU based countries. These suppliers are not considered primary suppliers. . The company has plans to improve domestic dairy farming in the future. As such, PS6 on Biodiversity Conservation and Sustainable Management of Living Natural Resources has been determined not being applicable at this time. Presence of Indigenous People (PS7) and Cultural Heritage (PS8) do not apply to the project because there is no indigenous people interaction and cultural heritage on project site. In the event that issues anticipated by these PSs arise (e.g. development of dairy farms), Al Safi Danone will promptly inform IFC and screening and assessment of these issues against Performance Standards requirements will be done through the proposed environmental and social corporate and plant-level management systems (ESMS).

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:



Policy. Al Safi Danone senior management decided at the outset to design and build a state-of-the-art processing facility based on lessons learned and best practices from other Danone dairy processing facilities around the world, establish partnerships with equipment suppliers with highest technical and resource efficiency specifications, and mainstream food safety management requirements in the plant’s lay-out and construction. The Company has prepared quality, environmental and safety policies which are in line with ISO9001/ 14001/OHSAS18001 Standards; committing to be in line with local law and international standards, continual improvement, targets of zero accident and complaint and reducing use of natural resources. The Company also implements Danone corporate business conduct policy which includes Danone’s commitments toward its employees, the environment, consumers, suppliers and customers, competitors, shareholders and the country requirements in which it operates.

(media.corporate-ir.net/media_files/irol/95/95168/cg/Business_Conduct_Policies

(version_anglaise_V3.2_avr_06).pdf)



Danone’ corporate sustainability policy is based on reducing carbon emissions, sustainable groundwater use policy, giving priority to sustainable materials, and sustainable agriculture and those are reflected in the Company’s policies. Going forward, as set forth in the ESAP, Al Safi Danone will update its own set of EHS policies which will include: i) IFC Performance Standards, applicable WBG EHS Guidelines, ii) defining an accountability framework (ref. E&S team) in its organogram for its effective implementation; iii) ensuring a communication strategy to all employees, suppliers and partners (e.g. out growers and communities); and, iv) ensuring internal/external audit for assessing their effectiveness, including meeting quantifiable performance targets and indicators.



Identification of Risks and Impacts. Submission of a formal Environmental and Social Impact Assessment (ESIA) study for this project is not required by the local authorities in KRG. The Company has an operational license which was issued by Ministry of Trade and Industry of KRG and confirms food safety and hygienic conditions provided by the Company to operate in KRG as well as a permit from relevant local authorities for the construction and operation of the processing plant.



In Danone Group, since 2006, the facilities have been audited and evaluated on the basis of a common reference, “Green” which was developed for Danone Group by a specialized firm and which goes beyond regulatory requirements to incorporate the Group’s own priorities. Danone’s Green Plants Initiative’s main purpose is to reduce environmental impacts by improving energy efficiency and reducing waste during manufacturing. (e.g. measuring and piloting the environmental performance of packaging (e.g., recycling of materials, reduction in weight), car
bon and water footprints),etc. This plant will also be audited after one year of operations against “Green” standard, OHS and HACCP/ISO22001 auditors.



Management Programs. A quality and food safety management system consistent with ISO 22000 and HACCP (Hazard Analysis and Critical Control Points) is under preparation, with a target certification date of 2015. The company prepared HACCP plan and quality procedures, operational procedures and instructions. Environmental and Occupational Health and Safety procedures and instructions are under preparation (e.g. LOTO, fall prevention, inspection checklist has already been prepared).The Company plans to have ISO 22000:2005 certification in a year as indicated in the Environmental and Social Action Plan (ESAP). The Company will have a systematic Environmental and Occupational Health and Safety Management system in line with internationally recognized standards, (e.g. ISO14001 and OHSAS18001 respectively) as per the attached ESAP.



Organizational Capacity and Competency. A qualified Quality and Food Safety Manager is responsible for quality management system, laboratories and waste water treatment plant operations. The Performance and Safety Engineer is responsible for coordination of OHS (Occupational Health and Safety) issues. The responsibility of environmental management system and waste management is distributed over performance and utilities departments. Currently, environmental matters are under responsibilities of utilities engineer. An environmental coordinator will be assigned and the job description will clearly define responsibilities, as indicated in the ESAP.



Emergency Preparedness and Response. The plant was constructed according to NFPA (US National Fire Protection Agency/ FM (Factory Mutual) and the Global Industrial Property Insurance Company’s Standards. Emergency signage, evacuation routes, fire extinguishers and emergency lighting are well designed and in place and sprinklers and detection system are installed. As the plant is yet to be fully commissioned, ASDI is in the process of finalizing the operational procedure for an emergency preparedness and response plan, including ammonia leakage. Regular fire and evacuation drills will be scheduled, as indicated in the ESAP.



Monitoring and Review. The Performance and Safety Department is responsible for following up KPIs (Key Performance Indicators). Effluent discharges, air emissions, solid wastes, energy and water consumptions, carbon footprint and lost time accidents, LOTO compliance, customer complaints, supplier performance (quality and environment) are among the regularly monitored parameters at the plant in compliance with PS1. Reporting of EHS key performance indicators will be done internally as per the requirements of the integrated management system and externally to the national regulatory agencies and IFC through the annual monitoring report (AMR). The Company will submit an Annual Monitoring Report on Env
ironmental and Social Performance to IFC, in accordance with the IFC requirements.



Stakeholder Engagement. The facility is established on former agricultural land that was officially re-designated for industrial use. There are no households or neighbors in the 2 km vicinity of the facilities. Surrounding land is also designated as industrial area and there are some other industries at the periphery. Wells have been established after the findings of an hydrogeological study, ensuring that there are no affected communities. . Therefore a stakeholder engagement plan is not required.



External Communications and Grievance Mechanism. As per the attached ESAP, Al Safi Danone will prepare a community grievance mechanism in accordance with IFC’s PS1 requirements in order to pro-actively receive and manage any complaints from the public. The Company will implement and maintain a procedure for external communications that includes methods to i) receive and register external communications from the public; ii) screen and assess the issues raised and determine how to address them; iii) provide, track, and document responses, if any; and (iv) adjust the EHS management program, as appropriate as per the attached ESAP.

Working Conditions and Management of Worker Relationship



Human Resources Policies and Procedures. ASDI has well-established local versions of Danone Group corporate human resources management system with various internal regulations and procedures that cover core HR issues, including recruitment, training, working conditions, performance evaluation, social benefits, disciplinary actions and dismissal. All legal registrations & procedures of employment contracts, social security & income tax are issued and executed legally up to date.



Working Conditions and Terms of Employment. ASDI currently employs 71 people and will plan to hire an additional 15 after commissioning of the 3rd production line under the proposed Project. All employees are registered under national security system according to KRG legislation. The HR Manager reported that she did her best efforts to employ women, such as meeting with related NGOs and governmental agencies and implementing a clear non-discrimination policy is in place. Nevertheless, the current number of women employed is low. The HR department in the head office oversees general employment policies and procedures under the guidance of HR Manager. The base salary payment for the plant is above the national minimum wage. Other benefits are provided, including private health coverage (including dental and optical needs), performance bonus, extra hours payment, transport, subsidized meals, annual leave and public holidays, etc.



Workers’ Organizations. Currently there are no worker’s associations or trade unions established in ASDI as the plant has been recently commissioned. However, the Company stated that it does not prohibit establishment of such associations as the Danone Group level HR policy includes an explicit reference to freedom of association. Non-discrimination, equal opportunity, worker’s grievance mechanism and OHS provisions will be integrated into the local version of the HR policy and be available in local (Kurdish) language. Direct employees and contractor workers will be informed of this policy in line with local law and IFC’s PS2 requirements, as indicated in the ESAP.



Non-Discrimination and Equal Opportunity. Company HR’s manager stated that there is no discrimination on the basis of personal beliefs, sex or characteristics unrelated to inherent job requirements. The current workforce includes representatives from various communities, including Kurds, Arabs, Turkish, Egyptians and Pakistani,.



Retrenchment. ASDI does not anticipate a reduction in the current workforce; in fact the project will create new employment opportunities thus will increase the overall employment figure at the facility by 25 percent. However, if becomes necessary in future, ASDI will prepare a retrenchment plan based on consultations with the affected workers, the workers’ labor unions and in accordance with local Labor Codes and IFC’s PS2 requirements.



Grievance Mechanism. The Company does not have a fo
rmalized worker’s grievance mechanism although the open door policy allows employees to raise and register their concerns with the management team. Going forward, as set forth in the ESAP, a grievance procedure, for the Company employees, to express their grievances and protect their rights regarding working conditions and terms of employment will be established as per IFC’s PS2 requirements. Direct employees as well as construction and installation contractors and service provider workers will be made aware of the grievance mechanism procedure during the induction training session.



Protecting the Workforce: The minimum age of employment is 18 at the plant. There is no use of child labor and/or forced labor.



Occupational Health and Safety (OHS): As the plant of ASDI has recently been commissioned into full commercial operation, while HACCP awareness and good hygiene practices session have started, progress in EHS training is relatively limited to date. Each new employee goes through an induction program including EHS awareness: in time this will be revised to focus on specific workplace/job risks and hazards. ASDI has already a risk assessment procedure and will perform risk assessments after start up. Risks observed during the site visit included slippery floors, work at height, chemicals, stand-alone workers, machine guarding, truck loading and unloading, confined spaces and ammonia storage (refrigerant). OHS Procedures and instructions related to above mentioned subjects are in place in English. These documents will be translated into local language, as indicated in the ESAP.



The dairies’s refrigeration systems, as it is typical in this industry, are based on ammonia refrigerant. Handling and storage practices will be in accordance with industry’s good practices, including the International Institute of Ammonia Refrigeration (http://www.iiar.org). Amount of Ammonia (NH3) stored is 2 tons. Ammonia detection system is in place and adjusted to 100 ppm sensitivity. Alarms need to be set at the Threshold Limit Value (TLV ) of 50 ppm in accordance with EU and OSHA codes and ASDI will ensure that necessary PPE (Personal Protective Equipment) will be available and ammonia leakage scenario is included in emergency plan as per the ESAP.



Workers Engaged by Third Parties: ASDI does not employ third parties for its operations. For the construction works which was ongoing during the appraisal visit, a Turkish construction company Altero has been contracted. Altero is an experienced construction company, especially on hygienic design and construction of food processing facilities. Proper accommodation, social areas and food service for contractor’s workers was provided on site. ASDI will improve contractor management system in terms of OHS risks (work at height, PPE use, and electrical safety) and develop an Occupational Health and Safety (OHS) Manual for contractors which will be applicable for construction/installation work of the additio
nal processing line, as per the attached ESAP.



Supply Chain. Skimmed Milk Powder (SMP) and Anhydrous Milk Fat (AMF) are the main raw materials which are currently imported from EU based Danone facilities. There is no issue with child labor or forced labor.

Resource Efficiency: CIP (Cleaning in Place) system is used for automated cleaning of lines. Boiler condensate is reused and this reduced steam blow down by 6%. Because the plant has been recently commissioned and was not not fully operational during the appraisal, there is no complete data set for energy and water consumption and efficiency to date. The Company has defined corporate KPIs for water and energy use per ton production and these will strictly monitor them after plant commissioning.



Greenhouse Gases. The Company will calculate greenhouse gases emissions annually. If CO2 equivalent is higher than 25,000 metric ton per annum, the company will be required to calculate and report on GHG emissions via its AMR submission to IFC.



Water Consumption. Water used at ASDI plant for production purposes and other operations is sourced from artesian wells and is treated with filtration and reverse osmosis designed and installed by Fora France company. Water samples are sent to an accredited lab for assessment regularly. The flow rate and depth of wells are approximately 38m3/hr and 120 m respectively. A hydrogeological study was performed during the feasibility of this investment and before the construction of the plant by international reputable experts, under the leadership of Danone Group Water department. Assessment of water use by other stakeholders were carried out and found that nearest user is 500 m away and will not be negatively affected from water use of the plant.. According to KRG legislation, there is no specific permit or license for water use right on one’s own land.



Pollution Prevention:



WasteWater. Considering the water used during the cleanings of lines as well as its characterization, a biological wastewater treatment plant (WWTP) has been integrated into the design of the processing plant. The plant was designed and constructed by Fora France Company and comprises 600 inclined fine sieve (mesh = 1 mm), a settlement pond, an aeration pond and a chemical treatment unit. The WWTP was operating during IFC’s visit (handling the wastewater from product trials) and has been designed to operate to the following wastewater quality standards: COD 300 mg/l, BOD5 100 mg/l, TSS 50 mg/l, TN 50 mg/l, TP 5 mg/l and O&G 30 mg/l. These limits are in line with Danone internal requirements. The Company reported that KRG currently has no specific legislation for waste water quality. When compared to WBG’s Environmental, Health, and Safety Guidelines for Dairy Processing, there are slight variances in relation to COD (250 mg/l), BOD5 (50 mg/l), TN (10 mg/l), TP (25 mg/l) and O&G (10 mg/l). Now that the plant has entered into operational phase, ASDI will collect and analyze monitoring data for these parameters and determine whether the current WWTP is capable of meeting IFC guideline limits (including when the third line becomes operational). If WBG guideline limits cannot be met, ASDI will implement corrective actions, such as inc
reasing retention time in the aeration lagoons or adding additional units to its WWTP. This is captured in the attached ESAP.



Wastes. Domestic wastes, such as paper, cardboard, wood, metal, are collected and disposed in assigned landfill. Packaging waste is collected and recycled by a licensed service provider. Hazardous waste like fluorescent lights, printer cartridges, and chemical containers is collected separately and disposed by a licensed company.



Air Emissions. Electricity is supplied from the grid and generated by 4 generators with the total capacity of 3552 KV. Steam boiler’s capacity is 0.6 tons/hr. A flue gas analyzer continuously monitors air emission parameters which are in line with IFC’s limits.



Pesticide Use and Management. Quality department has prepared a pest management plan and has an agreement with a licensed company for pest management activities. Products used should not be listed under WHO Class 1a and 1b chemical formulations. ASDI will adopt a management procedure to require contractors and suppliers for mandatory training of workers and ensure provision of adequate PPE based upon MSDS and/or ICSCs for the materials used. This requirement will be added in employee’s OHS training programs.

Community Health and Safety: There are no immediate households or neighbors in the 2 km vicinity of the facilities. Given the nature of company activities, noise is not significant. The plant is close to main road and since the area is designated for industrial use, there are other manufacturing industries 500 m away from the plant. As explained in PS3, a hydrogeological study was performed and any potential adverse impacts on other users of water were assessed and found that nearest user is 500 m away and will not be affected by the water abstraction rate of the plant.



As per HACCP requirements, ASDI has established an active grievance mechanism for the customer complaints to regularly monitor the number and root cause of complaints under the scope of its food safety system. Traceability and product recall procedures are available in case of any need.



Raw materials and finished products are delivered in bulk via trucks. The Company will ensure that adequate internal controls are in place to ensure that vehicles and trucks entering and leaving Company facilities are well tracked and in good condition. The Company will ensure that traffic rules and vehicle maintenance periods are strictly followed by its outsourced distribution fleet in line with corporate traffic safety procedures.



The Company is securely fenced and employs 9 non-armed security personnel for 3 shifts. Security forces are well trained and outsourced from a multinational security company.



Community Grievance Mechanism: As described in PS1, the Company will establish communication procedures to openly share information with third parties and to address community concerns about possible adverse impacts of their operations and control measures in place to mitigate against these.

Given the limited potential for adverse social and environmental impacts arising from the project and its location, community engagement is not required by the KRG authorities for a facility like ASDI. The publication of this ESRS and associated ESAP, in local language, constitutes the client’s community engagement related to its project’s expansion plans. The company will identify additional opportunities to further engage with the communities in the vicinity of its premises.

Mustafa Ozgur Ozdemir, Finance Manager
Italian Village, Office No 5
Erbil – Kurdistan/Iraq
mailto:mustafa.ozdemir@alsafidanone.com
+ 964 6 62 643 229

Broad Community Support is not applicable for this project

Title	Anticipated completion Date
The company will effectively implement Quality and Food Safety Management System ISO 22001 and will certify the plant	06/30/2015
The Company will have a systematic Environmental and Occupational Health and Safety Management system in line with internationally recognized standards, (e.g. ISO14001 and OHSAS18001 respectively)	06/30/2016
The company will update its own set of its EHS policies which will include; IFC Performance Standards, applicable WBG EHS Guidelines, ii) defining an accountability framework (ref. E&S team) in its organogram for its effective implementation; iii) ensuring a communication strategy to all employees, suppliers and partners (e.g. out growers and communities); and, iv) ensuring internal/external audit for assessing their effectiveness, including meeting quantifiable performance targets and indicators	12/31/2014
An environmental coordinator will be assigned and the job description will describe specific E&S responsibilities	12/31/2014
Fire and evacuation drills will be organized regularly	03/31/2015
Ammonia (NH3) leakage scenario will be included in emergency procedure, the detection threshold value will be adjusted as 50 ppm and necessary PPE (Personal Protective Equipment) will be made available	03/31/2015
The Company will implement and maintain a procedure for external communications that includes methods to (i) receive and register external communications from the public; (ii) screen and assess the issues raised and determine how to address them; (iii) provide, track, and document responses, if any; and (iv) adjust the management program, as appropriate as per the attached ESAP.	12/31/2014
HR policy for Danone will be integrated in to ASDI operations in local language. Direct and contractor workers will be informed of this policy in line with local law and IFC’s PS2 requirements	03/31/2015
ASDI will perform risk assessments taking in to account that slippery floors, work at height, chemicals, stand-alone workers, machine guarding, truck loading and unloading, confined spaces, ammonia	06/30/2015
OHS Procedures and instructions will be translated in Kurdish	03/31/2015
The company will improve contractor management system in terms of OHS risks (work at height, PPE use, electrical safety) and develop an Occupational Health and Safety (OHS) Manual for contractors utilized for construction/installation work of additional processing line.	08/31/2014
ASDI will collect and analyze monitoring data and determine whether the current WWTP is capable of meeting IFC guideline limits (including when the third line becomes operational). Specifically: COD 250 mg/l, BOD5 50 mg/l, TN 10 mg/l, TP 25 mg/l and O&G 10 mg/l.)	09/30/2014
If the measured parameters are above IFC’s limits ASDI will improve WWTP to be in line with WBG’s effluent limits	06/30/2015