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

Key risks and issues associated with the project are: Kvareli Baga’s capacity to undertake adequate social and environmental assessment; monitoring of environmental, health and safety management practices; labor and working conditions during expansion and operations of facilities for farm employees as well as for contract workers; facility design and life and fire safety; animal welfare; adoption of best available technology including equipment selection; water availability/water use efficiency; waste water and organic waste management; refrigeration agents and other hazardous material management; farm land acquisition, community health and safety; internationally acceptable good agricultural standards in preparation, storage, and delivery of milk.

There is no land acquisition plan associated with the project, therefore PS5 is not applicable. . Presence of Indigenous People (PS7) and Cultural Heritage (PS8) do not apply to the project because there are no indigenous people or cultural heritage on project site. In the event that issues anticipated by these PSs arise, Kvarlis Baga 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

The Company will set up a policy defining the environmental and social objectives and principles that guide the project to achieve sound environmental and social performance and will communicate the policy to all levels of its organization in line with PS1 as per attached ESAP.



Identification of Risks and Impacts

Georgian legislation do not require a formal environmental impact assessment (EIA) for the proposed project. Nevertheless, as a part of the project for which IFC finance is sought, an environmental and social impact assessment will be performed in line with PS1 for Kvareli Baga activities, as indicated in the ESAP. This assessment will include a review of the applicable policy, legal and administrative framework, baseline data, assessment of social and environmental impacts, analysis of project design’s alternatives and E&S risks mitigation program.

Management Programs



The Company does not currently have a systematic quality, environment and social management system in place. There is a quality assurance system in place, yet improvements are required to formalize the system such as defining food safety risks, E&S risks like chemical use, slippery floor, confined spaces, hits and bites and establishing documented procedures and instructions . Currently, quality control is applied on basic raw materials and actively uses documented procedures for calving, milking veterinary requirements, acceptance conditions for calves. IFC’s Industry Specialist recommended that the implementation of vaccination of cows for brucellosis (RB51) and tick fever (Babesia and Theileria) and the regular testing of staff for zoonotic disease such as Tuberculosis.



The Company will implement a systematic environmental and occupational health and safety (OHS)

management system in line with PS1 and internationally accepted ISO14001/OHSAS18001 standards (see

ESAP).



Organizational Capacity and Competency:

Currently, farm manager is responsible for waste water treatment lagoons operations and safety training of employees. In order to bring greater focus to the management of EHS matters, the Company will hire or appoint a suitably qualified and experienced quality, environment and OHS coordinator and will make use of external EHS consultants as necessary (e.g. for risk assessments, site audits), The coordinator will receive training on management of environmental, occupational health and safety issues in company operations as agreed in ESAP. The coordinator will be responsible establishment of quality, food safety, environmental and occupational health and safety management systems and will undertake EHS awareness sessions with all Kvareli Baga staff to ensure that these are familiar with Kvareli Baga’s established EHS policies and management system.



Emergency Preparedness and Response:

The Company will prepare an emergency response plan that addresses the responsibilitie
s of the emergency response team, and specific emergency response actions for each likely emergency scenario (accident, earthquake, fire, storm, road accident and CCP (Crop Protection Products) spill based on the final arrangement with contractors for the construction phase, and reflecting the final operational settings for the operational phase. This is being outlined in the attached ESAP item.



Monitoring and Review:

Environmental monitoring is carried out at least once a year by the government environmental authorities according to Georgia’s Environmental legislation. Kvareli Municipality issued an operational license for the farm on October 16, 2013.



Considering the limited and site-specific environmental and social impacts from its operations, Kvareli Baga has not yet defined a comprehensive corporate EHS (Environmental Health and Safety) monitoring and reporting system procedure. As per the requirements of the management system, the Company will define EHS key performance indicators (KPIs) in order to monitor on a monthly/annual basis the following EHS parameters: a) Safety – Lost Time Incidence Frequency Rate (LTIFR), Accident Free Days; b) Sustainability – Carbon (kg/ton), Water Usage (kiloliters/ton) at processing and farm operations, Energy Usage (kWh/ton), wastewater monitoring effluents, noise, air emissions parameters generator, use of Crop Protection Products (CPPs) and fertilizers; c) Staff – Retention/turnover and training days in line with IFC’s PS1 requirements as per the attached ESAP. The results will be reported to senior management for review and action as well as IFC on a regular basis. The Company will also report annually to relevant Georgian authorities and to IFC through the submission of an Annual Monitoring Report (AMR).





External Communications and Grievance Mechanisms:



There are no immediate households or neighbors in the 2-3 km vicinity of the livestock farm and surrounding land is used for agricultural activities especially for crop production. Taking in to account that the scale and nature of the project, communities will not be affected from the project adversely. Nevertheless, Kvareli Baga will prepare a community grievance mechanism in compliance with requirements of IFC’s PS1 against any concerns complaints of public of transportation of milk and animal feed, use of chemicals on alfalfa and corn fields, and odour. Kvareli Baga 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.

Working Conditions and Management of Worker Relationship



Human Resources Policies and Procedures: The Company does not have a documented human resources (HR) Policy and set of Procedures. Therefore, the Company will be required to establish written policies and procedure to manage human resources, taking into account the scale of the business. The procedures should comply with Georgian Labor Code and regulation as well as requirements of IFC Performance Standard 2 on Labor and Working conditions as per the attached ESAP. This proposed HR Policy and operating procedures will recognize freedom of association, focus on occupational health and safety and provide a fair grievance worker’s resolution mechanism, which will extend to its contractors, as needed, and non-discriminatory and equal opportunity. The Company will make the HR policies available to the entire workforce including contractors when employed.



Working Conditions and Terms of Employment: There is a total of 12 staff members of which 2 are in managerial positions. The remaining employees are divided between operating jobs and milking ( a veterinarian, an administrative officer, chief of field work and machinery, a cleaner, a dairyman, a person who looks after calves, a machine operators, an herdsman, a field area watchman) . There are no women employed at present: Kvareli Baga management stated that is due to the nature of the work and the low current number of employees: the Company is expecting to increase staff number by hiring 5-6 further employees and will make its best efforts to increase number of women employed. Contractors are only employed when there are construction activities.

The employment contract includes a one month probation period and specifies working hours, annual leave days, remuneration, responsibilities and termination clauses. Working hours are defined as 8 hrs with a lunch break and workers are entitled to 24 days of paid annual vacation leave.



Workers’ Organization: Currently there are no worker’s associations or trade unions established in Kvareli Baga. However, the Company stated that it does not prohibit establishment of such associations. The Company will explicitly include the right to freedom of association in the HR policy to be developed.



Non-Discrimination and Equal Opportunity:

The company will include an explicit non-discrimination principle in its HR Policy.





Protecting the Work Force. Kvareli Baga does not employ any person under age of 18, nor forced labor.



Grievance Mechanism. The Company has an open door policy and because of there are only 11 employees, they can directly communicate their concerns to management. External worker protection mechanisms are ensured by Georgian labor laws. Nevertheless, as indicated in ESAP the Company will develop a formal grievance mechanism to allow employees express their concerns or suggestions. It will be ensured by the Company that all of the workers are aware of this procedure.
This procedure will include steps to be taken by workers to manifest any concerns, engage in a mediation process, contact responsible persons, and provide timely feedback in compliance with IFC’s PS2 requirements.



Occupational Health and Safety (OHS): Kvareli Baga does not have an established health and safety management system and does not have a system to record accidents and assess potential OHS risks associated with its activities such as handling of chemicals, work at height, slippery floors and confined spaces.



Although the use of Personal Protective Equipment (PPE) was observed in certain parts of production, it should be made more systematic to ensure worker safety. On the job training is given by the managers; however the Company should ensure further OHS training are provided to all workers and training records are kept in a systematic manner.



It is planned by the Company to prepare operating procedures and work instructions. In this respect, the procedures and instructions will be developed regarding environmental and health and safety issues as per the attached ESAP.



No periodic health controls are performed for workers and there is also no first aid kit in the Company’s premises. The nearest hospital is located 6 km away Kvareli. The Company will install first aid kits, organize health control twice a year for workers; given the risk of animal infection as indicated in the ESAP.



As set forth in the ESAP, Kvareli Baga will conduct a risk assessment to clearly define potential OHS risks in all workplaces based on which an OHS management system will be developed. The Company will implement an OHS management system as part of the integrated EHS management system and develop detailed OHS policies and procedures for its facilities; including but not limited to the usage of PPE, prevention of physical and chemical hazards related with its operations.) Machine operators have necessary trainings and licenses to use the related machinery (tractor, ploughing and seeding machinery) and preventive maintenance plan for the equipment and machinery is in place.





Fire hydrants are available on site. In addition, fire extinguishers will be readily available at office buildings and storage areas as per attached ESAP.





There is an active on the job training program, however this needs to be documented properly and relevant environmental and OHS related subjects will be included in the training program as described in ESAP.







Workers Engaged by Third Parties

The company has no contracted workers except for construction phases. The Company will use commercially reasonable efforts to incorporate working conditions and occupational health and safety requirements in contractual agreements with contractors who may be hired during the construction work, including relevant training programs on OHS. The Company will develop an OHS manual for its contractors and this will be attached to the contracts as per attached ESAP.



Supply Chain



Silage and alfalfa is used in the dairy for animal feed. Externally purchased feed material will be abandoned in four months when the Company will start growing forage in the farming lands. Therefore, animal feed will be mostly grown on site. The dairy will be low in dependence of imported commodities since only additional feed commodities including sunflower meal, corn grain, micro minerals, soymeal and vitamins.. Imported sunflower and soy meal originates in Ukraine. Micro minerals and vitamins are supplied from Israel. Corn, Lime and salt are locally sourced. Those products are not listed in the US Department of Labor’s list of Goods produced by Child or Forced Labor, nor are they associated with a high risk of significant safety issues.

Resource Efficiency



Purchase of lateral spray irrigation equipment for alfalfa production will reduce water consumption on fields.

CIP (Cleaning in Place) system is used for cleaning needs in the farm, which is more resource efficient than other techniques.



Greenhouse Gases:

Power is supplied from the national grid where it is interrupted frequently. To compensate the cuts, an 350 KVA generator is used as backup. Monthly average electricity, diesel oil, and fuel oil consumption is 19000 kWh,7900l and 600l respectively. Greenhouse gas emission is 2489 t CO2 eq/ year including cattle’s emissions.

Water Consumption: The dairy is located on water rich lands. The climate is also appropriate with annual rainfall of 700-750 mm spread relatively even throughout the year which enriches groundwater sources. In the dairy, water is supplied from a shallow (3-4 m) artesian well with a high water quality which is ideal for dairy farm operations and irrigation. The well is constructed and under the control of Kvareli municipality and 20m3/ hr abstraction limits. 3 more wells will be constructed in future by Kvareli Municipal Development Fund (MDF) Water is stored in two 16-tonne water tanks and pumped to the dairy farm. There is no water meter at the wells. The company will install counters on two wells and measure water consumption regularly as per the attached ESAPClimate is temperate and rainfall (700-750 mm) spread over the year. For the crop fields back up irrigation will be installed. Water is sourced from free flowing wells and the government has committed to drill three more wells and supply pumps and connection to nearby power. As mentioned under PS1 Monitoring and Review, the Company will measure water and energy consumption and will regularly benchmark those with the figures of best industrial practices.



Pollution Prevention



Wastes: The major waste stream in dairy is manure. Currently, manure is collected via a scraper system into a sealed/ impermeable geotextile covered pond with surface aerators. The sludge from the lagoon is used as fertilizer for the corn and alfalfa fields by spraying methods (fertigation). There is no discharge of liquid waste from farm to surface water courses or a pipeline. Concerning the risk of groundwater contamination by the leakage from ponds, the Company will regularly perform groundwater sampling and piezometric (measuring water pressure and head) monitoring and measurement around the ponds as indicated in the ESAP.

In addition water used for fertilization will comply with internationally accepted nitrate standards. (EU Nitrate Directive- 170 kg total N/ ha/ year) as per the attached ESAP.

This application will be abandoned after installation of the new dairy sheds. With the new project, concrete floor basin of feedlots will be replaced with compacted earthen layer which will decrease manure amount discharged to the pond significantly. Dry manure will be spread onto the farming fields on site
once or twice a year. The sealed pond will be used for collection of process wastewater from the dairy operations and this wastewater will be sprayed to the fields after neutralisationDistiller`s grain from local brewers and winery waste are available adjacent to the dairy farm. and used for feed needs of cows.

Solid and Hazardous Waste Management. Non-hazardous wastes, such as packaging materials, are stored on site and collected and recycled by a licensed company located in Kvareli. Domestic solid waste is collected and disposed by the specialized companies. The Company will designate an appropriate area as a waste collection area for solid and hazardous wastes, as per the attached ESAP.



Cooling agents. Non-ozone depleting gases R407 are used for cooling purposes. The Company reported that for the future refrigeration purposes, non-ozone depleting gases will continue to be used.



Pesticide Use and Management. The Company will prepare an Integrated Pest Management plan and procedures for its fields as per the attached ESAP.

Community Health and Safety



Dairy operations have risk factors for community health in consideration of biosecurity issues. In Kvareli Baga, three major diseases are considered to be significant: foot and mouth disease (FMD), tick fever and tuberculosis which can be well managed with good biosecurity and vaccine management practices. The Company is aware of FMD, which is very common in Georgia. The herd is vaccinated twice a year against FMD to prevent potential infection from and to surrounding farm animals via wind transmission. Brucellosis is also common in Georgia and the Company will apply RB51 vaccine in order to effectively eliminate risk of disease.



The dairy farm has a secure perimeter high fence with a single entrance where a spray disinfection unit was being established at the time of the appraisal.



There is no separate security personnel at the farm, unarmed herdsmen are responsible for site security and CCTV cameras are used for security purposes.



The area is rich with water and there are many free flowing water sources in the region. Nevertheless the Company will assess other users of water and will assess quality, quantity and health related risks and impacts and and 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. as per the attached ESAP. Information will be shared and any concerns dealt with via the grievance procedure as specified in PS1

Protection and Conservation of Biodiversity

The company and its shareholder own 210 ha lands adjacent to the farm. The lands were purchased between 2010 and 2014 and used for similar type of agricultural purposes or as pastures. Currently, alfalfa production is situated in 54 Ha of well drained fertile black sandy loam soils ideal for alfalfa production. Starting from 2015, the Company will allocate additional 69 ha for the alfalfa production with estimated yields of 10-15 tonnes per ha. From 2015, corn grain will be planted on 26 Ha of land with estimated yields of around 9-11 tonnes per Ha. Hence Kvarlis Baga did not significantly modify the land for its operations, there has been no conversion of natural habitat or other areas of biodiversity significance for these lands.



Sustainable Management of Living Natural Resources

The Company will commit to achieving certification under an appropriate voluntary sustainability standard that promotes good agricultural practices and which is recognized globally, regionally or nationally. These requirements are defined in the attached ESAP.







Animal Welfare



The company give attention to animal welfare (cows’ housing, food, water, and health ) to increase the productivity. The Company’s philosophy is to keep cows free from hunger and thirst, pain, injury or disease, fear and distress. Access to fresh water and a diet maintain full health is provided.

The current milking cow space is 8 square meters per cow (EU Directive > 3 m2 per cow) . For the planned number of 350 cows, The dairy has a small area for hospital cows and insufficient space to rear heifers and house dry cows. This will be addressed with this investment.

A new dairy shed is being constructed with higher walls to encourage better natural ventilation and will provide a 25 square meter space per cow whereby the cows will be bedded on natural dry manure and straw. This system, which is typical in Israel, significantly improves cow comfort as cows have soft bedding which reduces foot injury and infections.

Given the limited potential for adverse social and environmental impacts arising from the project, community engagement is not required by the Georgian authorities for a facility like Kvareli Bagas.. 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.

Natia Gargulia

Director
Kvareli Baga Ltd
13 Chavchavadze Str,
4800, Kvareli, Georgia
Tel: (+995 322) 201 122
e-mail:mailto:Natia.gargulia@kvareli-baga.ge

Broad Community Support is not applicable for this project

Kvarlis Baga(34907) Supervision Disclosure Snapshot – Version 2
Description	Anticipated Completion Date	Status	Comments	Completion Date
The Company will design and implement an Integrated Environmental, Occupational Health and Safety Management System (ESMS) to be consistent with ISO 14001, OHSAS 18001 and Good Agricultural Practices and in accordance with local laws and regulations, IFC Performance Standards and applicable WBG’s Environmental, Health and Safety Guidelines to be reviewed and approved by IFC, defining roles and responsibilities, and other necessary elements	31-Dec-2014	Completed	Completed	12/25/2015
The Company will design and implement an Integrated Environmental, Occupational Health and Safety Management System (ESMS) to be consistent with ISO 14001, OHSAS 18001 and Good Agricultural Practices and in accordance with local laws and regulations, IFC Performance Standards and applicable WBG’s Environmental, Health and Safety Guidelines to be reviewed and approved by IFC, defining roles and responsibilities, and other necessary elements	30-Jun-2015	Completed	Completed	12/25/2015
The Company will assign or hire a Quality, Environmental and OHS coordinator and will make use external EHS consultants as necessary and the coordinator will receive training on management of environmental, occupational health and safety issues in company operations	31-Oct-2014	Completed	Completed	12/15/2015
The Company will set up a policy defining the environmental and social objectives and principles that guide the project to achieve sound environmental and social performance and will communicate the policy to all levels of its organization in line with the requirements of PS1.	31-Dec-2014	Completed	Completed	12/25/2015
The Company will set up a policy defining the environmental and social objectives and principles that guide the project to achieve sound environmental and social performance and will communicate the policy to all levels of its organization in line with the requirements of PS1.	30-Jun-2015	Cancelled	Changed project circumstances mandated cancellation of this task
The Company will conduct an internal environmental impact assessment including a review of the applicable policy, legal and administrative framework, baseline data, assessment of social and environmental impacts, analysis of project design’s alternatives and E&S risks mitigation program in line with requirements of PS1.	31-Dec-2014	Completed	Completed	12/25/2015
The Company will prepare an Emergency Response Plan that addresses the responsibilities of the emergency response team, and specific emergency response actions for each emergency situation (accident, earthquake, fire, storm, road accident and CCP (Crop Protection Products) spill based on the final arrangement with contractors for the construction phase, and reflecting the final operational settings for the operational phase.	31-Mar-2015	Completed	Completed	3/31/2015
The Company will define and adopt Key Performance Indicators (KPIs) in order to monitor on a monthly/annual basis, the following EHS parameters: a) Safety – Lost Time Incidence Frequency Rate (LTIFR), Accident Free Days; b) Sustainability – Carbon (kg/ton), Water Usage (kiloliters/ton) at processing and farm operations, Energy Usage (kWh/ton), wastewater monitoring effluents, noise, air emissions parameters generator, use of Crop Protection Products (CPPs) and fertilizers; c) Staff – Retention/turnover and training days in line with IFC’s PS1 requirements	31-Mar-2015	Completed	Completed	3/31/2015
The Company will identify the range of stakeholders that may be interested in their actions and consider how external communications might facilitate a dialog with all stakeholders to develop and implement a Stakeholder Engagement Plan that is scaled to the project risks and impacts, and be tailored to the characteristics and interests of the Affected Communities (if any) in line with PS1.	27-Dec-2019	In progress	Due date revised as agreed with IFC Client
The Company will prepare a community grievance mechanism procedure in compliance with requirements of IFC’s PS1 against any concerns complaints of public of transportation of milk and animal feed, use of chemicals on alfa alfa and corn fields, and odor.	27-Dec-2019	In progress	Due date revised as agreed with IFC Client
The Company will develop a Human Resources policy that will comply with Georgian Labor Code and regulation, as well as key requirements of IFC Performance Standard 2 on labor and working conditions (e.g. Non-discrimination, freedom of association and collective bargaining, child labor and forced labor) applicable to its direct employees and contractors	31-Dec-2014	Completed	Completed	12/31/2014
The Company will establish a formal and structured grievance mechanism procedure for both direct and contracted workers. It will be ensured by the Company that all of the workers are aware of this procedure. This procedure will include steps to be taken by workers to manifest any concerns, engage in a mediation process, contact responsible persons, and provide timely feedback in compliance with IFC’s PS2 requirements.	30-Jun-2015	Completed	Completed	6/30/2015
The Company will establish a formal and structured grievance mechanism procedure for both direct and contracted workers. It will be ensured by the Company that all of the workers are aware of this procedure. This procedure will include steps to be taken by workers to manifest any concerns, engage in a mediation process, contact responsible persons, and provide timely feedback in compliance with IFC’s PS2 requirements.	31-Mar-2016	Cancelled	Changed project circumstances mandated cancellation of this task
The Company will develop and adopt job specific procedures and instructions regarding environmental and health and safety issues.	30-Jun-2015	Completed	Completed	6/30/2015
The Company will install first aid kits, organize health control twice a year for workers; given the risk of animal infection	30-Jun-2015	Completed	Completed	6/30/2015
The Company will conduct a risk assessment study to clearly define potential OHS risks in all workplaces	30-Jun-2015	Completed	Completed	6/30/2015
The Company will implement an OHS management system as part of the integrated EHS management system and develop detailed OHS policies and procedures for its facilities; including but not limited to the usage of PPE, prevention of physical and chemical hazards related with its operations	31-Dec-2015	Completed	Completed	12/31/2015
The Company will develop an Occupational Health and Safety (OHS) Manual for contractors utilized for construction/installation work of additional processing lines	30-Sep-2014	Completed	Completed	12/25/2015
The Company will ensure that adequate fire extinguishing equipment is available office buildings and storage areas.	31-Mar-2015	Completed	Completed	3/31/2015
The Company will conduct fire drills in the necessary frequency	31-Mar-2015	Completed	Completed	3/31/2015
The Company will designate an appropriate area as a waste collection area for solid and hazardous wastes	31-Mar-2015	Completed	Completed	3/31/2015
The Company will install counters on two wells and measure water consumption regularly.	31-Mar-2015	Completed	Completed	3/31/2015
The Company will regularly perform groundwater sampling and piezometric measurement around the ponds	31-Mar-2015	Completed	Completed	3/31/2015
Water used for fertigation will comply with internationally accepted nitrate standards. (EU Nitrate Directive- 170 kg total N/ ha/ year)	31-Mar-2015	Completed	Completed	3/31/2015
The Company will prepare an Integrated Pest Management plan and procedures for its fields	31-Dec-2015	Completed	Completed	12/31/2015
The Company will achieve certification under an appropriate voluntary sustainability standard that promotes good agricultural practices and which is recognized globally, regionally or nationally	27-Dec-2019	In progress	Due date revised as agreed with IFC Client
The Company will achieve certification under an appropriate voluntary sustainability standard that promotes good agricultural practices and which is recognized globally, regionally or nationally	31-Dec-2016	Cancelled	Changed project circumstances mandated cancellation of this task